Cost Of Living In Dubai Edges Up

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Expats in Dubai are being squeezed by rising inflation and increasing living costs, according to a new report.

In the year to February, Dubai saw inflation rise 0.2% over the 12 months, which was fuelled by a rise of 2.2% in prices for food and non-alcoholic drinks in the previous month.

The report by the Dubai Statistics Centre also reveals that housing and utility costs, which make up around 44% of consumer outgoings, fell by 1.2%.

The inflation rate in Dubai between January and December rose by 0.53% after costs for housing, water, transport and gas increased.

Sultan bin Saeed Al Mansouri, the Minister for Economy in UAE, said he expected inflation to remain at between 1% and 1.5% but economic analysts are predicting that inflation will now grow to 1.8% this year, up from 0.7% last year.

Inflation forecast

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However the report by the bank Emirates NBD is forecasting that inflation will reach 2.5% by the end of 2013.

Predictions for inflation rises follows deflation last year and the current rate of inflation is still the lowest it has been since 1990.

Indeed, Dubai’s consumer prices actually fell by 1.7% in 2012, which made it the first full 12 months of deflation since 2007.  This followed price rises of 0.5% in 2011.

The statistics reveal that the biggest contributor to increasing prices in Abu Dhabi last year was ‘restaurants and hotels’ which saw prices grow by 16.4%.

Food and non-alcoholic drinks and also rose in price by 7.6%.

One of the leading drivers for increasing inflation in 2013 is the re-emerging housing sector which is beginning a long awaited recovery.

Consumer confidence

Economists at the HSBC bank say that in addition to house prices picking up, there is also strong demand which is leading them to forecast an inflation rate of 1.6% year-on-year for 2013 and their protection for 2014 is that it will rise to 3.5%.

Inflation in the UAE is calculated by using groups of commodities such as oil and fats, which increased by 6%, meat rose by 5.3% and vegetables increased by 4.3%.

When these increases are added to the consumer price index, the drop in housing and utility costs of 6.5% had a much bigger impact because they account for such a large chunk of all consumer expenses.

The UAE still offers expats a high standard of living in what is a politically stable country in a multicultural society and many industries offer high salaries when compared to worldwide averages.

A recent study of people living in Abu Dhabi revealed that consumer confidence in their economic performance remains high with fears of rising inflation being of little or no concern.

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