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Falling oil will lower Gulf inflation

Falling global oil prices will reduce inflationary pressures in the UAE and in the Gulf Cooperation Council (GCC) member countries, local economists told Gulf News on Wednesday.

  • By Himendra Mohan Kumar, Staff Reporter
  • Published: 23:37 September 17, 2008
  • Gulf News

Abu Dhabi: Falling global oil prices will reduce inflationary pressures in the UAE and in the Gulf Cooperation Council (GCC) member countries, local economists told Gulf News on Wednesday.

They said transportation costs and consequently, the price of goods and services will come down as well. "Inflation will fall in GCC countries on weaker oil prices and a stronger dollar. Since the GCC countries have factored in $40 per barrel oil price in their budgets, lower oil income won't hurt growth," said Mohammad Al Asoomi, a Dubai-based expert.

Mohammad Amerah, an Abu Dhabi-based economy expert agreed. "The local economy should be able to continue its growth momentum," said Amerah.

"Locally manufactured products can compete better in terms of prices, specially those manufacturing industries that use oil as feedstock," Amerah said, citing examples of processed food industries and clothing and leather industries which, he said, will gain a competitive edge.

However, Dalton Garis, associate professor of Economics at the Petroleum Institute in Abu Dhabi said it will be premature to make any forecasts at this stage.

"Oil prices may pick up again. About 90 per cent of Abu Dhabi's income comes from oil and gas sales. Whether lower oil prices will affect economic growth in the UAE or not remains to be seen."

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