Inflation in UAE touched 11.1 percent in 2007

June 17th, 2008 - 10:07 pm ICT by IANS  

Abu Dhabi, June 17 (IANS) The rate of inflation in the United Arab Emirates (UAE), home to around 1.5 million expatriate Indians, touched 11.1 percent in 2007, UAE’s Minister for Economy Sultan Bin Saeed Al Mansouri said Tuesday. The figure reflected increase in prices of goods and services last year and was calculated by measuring the percentage change in prices of a representative basket of goods and services consumed by the average UAE household throughout the country, the state-run Emirates News Agency (WAM) quoted the minister as saying.

Research conducted by the Ministry of Economy’s Consumer Price Index (CPI) Division revealed that the 2007 rate resulted from varying increases in the consumer prices of all expenditure groups.

The House Rent and Related House Items category recorded the highest gain among all groups at 17.5 percent, followed by Other Goods and Services at 16.8 percent.

Increases in the average prices of other expenditure items ranged from 3 to 8 percent.

The CPI Division identified two basic factors that made the rent and household item category a major inflationary source: a significant increase in rental rates in 2007 and the large weight of the category in household expenditure.

The House Rent and Related House Items group was the main contributor towards inflation, contributing 6.5 percent towards the total inflation figure of 11.1 percent, or about 58.6 percent of the total figure.

The Other Goods and Services group accounted for 1.4 percent of the total inflation figure of 11.1 percent, or about 12.8 percent.

The contribution of each of the other expenditure groups to total inflation was less than 1 percent.

The minister said that the CPI has been based on a consumer basket that was derived from the results of the Household Expenditure and Income Survey of 1997. Therefore, he said, this index was outdated since several goods and services currently consumed by average households did not exist back then.

Consequently, the ministry established, in coordination with the International Monetary Fund (IMF), the CPI Division to develop and upgrade the system.

The scheme included several phases, the most important of which was the recent Household Expenditure and Income Survey.

Results of this survey, once available, would be used to construct the new consumer basket, which would better reflect the prevailing patterns of consumption in the UAE. It is expected that monthly inflation figures, based on the new consumer basket, would be available early 2009, Al Mansouri said.

He also added governments in the various emirates of the country were attempting to contain inflation by capping annual rental price increases at various levels.

The Ministry of Economy also, through discussions with major distributors - cooperatives as well as private retailers - has managed to fix the prices of basic commodities.

These commodities constitute around 70 percent of retail trade in the UAE.

In the booming construction sector, the ministry signed an agreement with various local cement producers to increase production and thus reduce prices of building materials.

The ministry eventually exempted cement and steel from custom duties at all UAE ports, Al Mansouri said.

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