Dubai: Consumer prices in Dubai fell precipitously as the falling housing and food costs meant that the emirate witnessed its lowest inflation rate in five years, a recently released Dubai Chamber of Commerce and Industry analysis reveals.
According to the Dubai Statistics Centre, Dubai's inflation rate stood at 4.1 per cent in 2009 as compared with 11.3 per cent in 2008. Housing, water, electricity and gas price growth, accounting for the largest share of the Consumer Price Index (CPI) weight, stood at 2.4 per cent in 2009 as the combination of falling rental and property prices meant that individuals and businesses were left with more disposable income in their pockets last year.
Trend reversal
"Dubai recorded its highest inflation rate in over 20 years at 11.3 per cent in 2008 on the back of a surge in rents and food prices due to higher global commodity prices and a sharp increase in its import bill due to the weakening US dollar. This trend has clearly reversed in 2009 due to the resurgence in the US dollar, falling commodity prices, a correction in the real estate sector and weakening domestic demand," the report said.
"This strong drop in rental accommodation, commercial real estate and warehousing, will certainly have further positive implications for doing business in Dubai in 2010. Looking ahead, from a business perspective, a drop of inflation will increase the competitiveness of the UAE and attract more business start ups."
In another analysis, Dubai Chamber suggested that Dubai's government sector contributed significantly to GDP growth in the third quarter of 2009. Whilst total GDP in constant prices contracted by 4.1 per cent in the third quarter of 2009 as compared with the third quarter of 2008, the government sector rose by 11.4 per cent during the same period.
"In response to the current downturn, Dubai policymakers have been swift to act with a large fiscal stimulus programme aimed predominantly at infrastructure investment which was the key driver behind the robust rise in government spending in the third quarter of 2009 as compared with the third quarter of 2008," it said.
The real estate and business services sector registered a decline in growth of -18.7 per cent in the third quarter compared with the same period in 2008.
