The UAE recorded an inflation rate of 2.5 per cent for 2021 according to the Federal Competitiveness and Statistics Centre. Image Credit: Megan Hirons Mahon/Gulf News

Abu Dhabi: The UAE recorded an inflation rate of 2.5 per cent for 2021, indicacting price stability in the country.

Statistics from the Federal Competitiveness and Statistics Centre showed that the Consumer Price Index (CPI) at the end of 2021 reached 108.62, compared to 105.97 in December 2020.

According to the Central Bank of UAE (CBUAE) CPI inflation rate in the UAE had turned positive during the third quarter of 2021, for the first time since Q4 2018, at 0.6 per cent year-on-year.

The 2021 FCSC report showed that the rate of inflation in food and beverages stood at 3.71 per cent, with that of tobacco at 0.65 per cent, clothing and shoes at 0.51 per cent, while housing, water, electricity and gas saw a decrease of 2.58 per cent. Household fixtures and equipment recorded a 2.13 per cent inflation rate, while that of health services stood at 0.45 per cent, communications at 0.13 per cent. Education was down by 0.20 per cent, restaurants and hotels saw a rise of 1.60 per cent, and miscellaneous goods and services decreased by 1.02 per cent.

The report also revealed Abu Dhabi recorded an inflation rate of 0.08 per cent in December 2021 compared to November, while the inflation rate in Dubai was 0.09 per cent, Sharjah at 0.11 per cent, Ajman at 0.11 per cent, Umm Al Qaiwain at 0.11 per cent, Ras Al Khaimah at 0.13 per cent, and Fujairah at 0.10 per cent.

Effective fiscal and monetary policies

The moderate inflation rates highlight the country's economic stability and the effectiveness of its financial po

CBUAE has projected the  UAE’s gross domestic product (GDP) to grow 4.2 per cent in 2022 and non-hydrocarbon real GDP to increase by 3.9 per cent. 

CBUAE in its latest quarterly economic review had indicated that the inflation is expected to go up moderately in 2022 largely resulting from global rise in prices. Rising inflation is expected to result in an increase in the Federal Funds Rate which would lead to an increase in CBUAE’s Base Rate applicable to the Overnight Deposit Facility (ODF), which provides an effective interest rate floor for overnight money market rates in the UAE. The central bank said it will be monitoring economic and financial developments and the liquidity situation of banks operating in the UAE to support the financing needs of the private sector.