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UAE inflation rises in April

Higher food costs contribute to second consecutive monthly increase in prices

Image Credit:Gulf News Archive
0.78%rise in UAE consumerprices in April
Gulf News

Dubai: In a second consecutive month of increases, consumer prices in the UAE climbed 0.78 per cent year-on-year in April, led by rising food costs.

According to the National Bureau of Statistics, the heavyweight food and non-alcoholic beverages component rose 4.52 per cent in April compared to a year earlier.

According to David Macadam, head of retail at Jones Lang Lasalle, rising food and commodities prices is a global phenomenon and not just isolated to the UAE.

Population increases

Eckart Woertz, programme manager of econ-omics at the Gulf Research Centre said it could be the result of a number of factors. "On the demand side we have population increases and change to more meat and dairy based diets in emerging markets.

"On the supply side, productivity growth has slowed and in some regions of the world agriculture faces severe resource constraints like lack of water and cultivable land," Woertz said.

Another factor that contributes to the rising food costs is the UAE's reliance on imports."The majority of food that comes into this area comes from different countries. So a lot of the price increase has to do with the rising cost of jet fuel, which is double what it was about a year ago," Macadam said.

Woertz sees prices remaining at an elevated level compared to the past decade.

"We don't have the same levels of increase over short periods of time like in 2007 and 2008. But since food prices corrected sharply in the second half of 2008 they've crept up again," said Woertz.

Price shock

Cheaper imports

The Gulf region — a large euro zone importer — stands to gain as the euro weakens.

"A weaker euro would make imports of goods from the euro zone cheaper. This is positive for inflation, which I was expecting to be low in 2010 anyway," Marios Maratheftis, regional head of research at Standard Chartered Bank, told Gulf News.

"Overall competitiveness for exports for the UAE is not a serious concern ... The competitiveness of the tourism sector might be affected. But the concerns ease as the summer months are anyway the low season for the UAE," he said.