The UAE Central Bank predicts that UAE inflation will decrease in 2023 and 2024 due to a slower increase in various sectors of the economy and a global disinflation trend.
The cost of living is expected to decline as inflation is projected to decelerate to 3.2%, led by softer price increases in all categories, especially transport and food and beverages. The disinflation trend worldwide is expected to keep imported inflation modest, while rents and wages will contribute moderately.
By 2024, inflation is expected to slow further to 2.8%, in line with global trends. The cost of living began to rise as the country started to recover from the pandemic, driven by higher demand for products due to an increase in the population with a strong inflow of foreign workers.
The rise in rental prices after the pandemic has also slowed down in most areas and stabilized in some areas. Furthermore, the UAE’s interest rate hikes in line with the US Federal Reserve have also helped control inflation in the country.
H.E. Abdulla bin Touq Al Marri, Minister of Economy of the UAE, said in December during a news conference that inflation is one of the lowest in the world and it’s expected to drop further in 2023.
“Inflation in the first nine months was 5.5 per cent, one of the lowest in the world. We are looking at inflation going down further next year,” Al Marri said during the press conference.
As per Central Bank CPI inflation data, the cost of transportation, food and beverages, recreation and culture fell in the fourth quarter as compared to the previous quarter.
Economists echoed the Central Bank projections, saying inflation will ease in the UAE and Gulf this year and will be among the lowest in the region.
“Inflation in Dubai edged up to 4.9 per cent year-on-year in February 2023 on the back of stronger food inflation. But this is well below last year’s peak and we think the headline rate will ease this year,” said William Jackson, chief emerging markets economist at Capital Economics.
Jackson said inflation has slowed at the start of this year across the Gulf region. “We think it will continue to do so over the rest of this year.”
According to Oxford Economics, inflation in the UAE will more than halve this year and will be one of the lowest among the regional countries in 2023. It will be averaging 2.1 percent as compared to 5.6 percent last year.