Dubai: Economists and local business people are attributing a drop in fresh food prices in Dubai to volatility in currency and oil.
The price of fresh food in Dubai dropped by 1.1 per cent in February 2015 compared to the same period in 2014.
“The appreciation of the US dollar against the euro and a low oil price are the main factors behind the drop in food price in the UAE,” said Dr Abdul Razzaq Al Fares, Chief UAE economist.
“Over production of food and a decrease of the markets demand ... can be another essential factor leading to this drop,” he said.
The euro dropped by 26 per cent against the dollar between March 2014 to March 2015, a 12-year low, due to the likelihood of an increase in US interest rates, the deepening crisis in Greece and the effect of the European Central Bank (ECB) quantitative easing programme, which was launched this month.
Fresh food prices continued to follow a see-saw pattern affected by currency value and oil prices as UAE imports 85 per cent of its food, Al Fares said.
Saeed Al Sagheer, General Manager of Al Sagheer trading Company, said that most of food and vegetable prices have dropped because of the depreciation of the euro.
“Some vegetable prices, such as potatoes, dropped by 60 per cent while fruits, which is mostly imported from Europe dropped by 10 to 15 per cent,” he said.
However, he justified the fixed price of fresh food on the shelf in most big outlets in Dubai to the big margin of profit they target and to increasing demand.
“But if consumers go to small groceries or the fruit and vegetable market they will recognise the drop in prices,” he said
This index usually involves monthly collection of 590 price quotations for fresh food items from seven major retail outlets in Dubai and includes most of the essential fresh food categories, meat and poultry, fish and seafood, fruits and vegetables.
The UAE’s currency is pegged to the dollar so the increase in the dollar value will not have a negative impact on food imports and the trader will pay less in this business. This will automatically lead to price drop, Al Fares said.
The index shows that the downturn was due to price drops in the fish and seafood group by 12.8 per cent, while the price of meat and poultry, fruits and vegetables increased by 3 per cent, 2.2 per cent, 0.2 per cent respectively, according to the chamber index.
However, the index highlighted an upturn in the prices of fresh food by 1.5 per cent in February 2015 compared to January 2015. The largest increase was in vegetables at 3.8 per cent followed by fruits at 3.3 per cent and meat at 1 per cent while the fish and seafood category saw a 3.4 per cent drop.