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UAE Central Bank revises inflation forecast downwards for 2024

The non-tradable portion of the consumer basket is expected to be the primary driver of inflation, which is predicted to average 2.3% again in 2025

The United Arab Emirates Central Bank has lowered its previous prediction of 2.5% for inflation in 2024 to 2.3%. The banking authority has stated in its most recent quarterly economic review that the downward revision is the result of lower-than-expected increases in rents, incomes, and commodity costs.

“Commodity prices, wages and rents are expected to increase at a lower rate than previously expected with the dirham appreciation, due to the USD appreciation,” the UAE Central Bank said.

The non-tradable portion of the consumer basket is expected to be the primary driver of inflation, which is predicted to average 2.3% again in 2025.

Dubai’s headline inflation rate decreased to 34.4% in the first quarter of 2024, which was less than the global average. The ratio significantly increased in April of this year alone, causing the figure to accelerate to 3.9%, because transportation costs make up the third-largest category in Dubai’s consumer basket.

The UAE Central Bank has also reported that housing group prices in Dubai, which include rent, as well as the costs of gas, electricity, water, and other fuels and account for 40.7% of the consumer basket, kept rising, with an annual average of 6.5% in April 2024 following an average of 6.3% in the first quarter of the year.

The second-largest group in the consumer basket, food and beverage, saw a decrease in inflation during the month, from an average of 3.3% in the first quarter to 2.3%. The rate of inflation in all other categories of the emirate’s consumer basket decreased/stayed the same in April 2024, with the exception of apparel and footwear, health, recreation, sport, and culture, as well as dining establishments and lodging services.

Meanwhile, the Gross Domestic Product (GDP) of the United Arab Emirates is projected to grow at a rate of 31.90% in 2024 and then reach a peak of 6.20% in 2025. The UAE Central Bank’s most recent economic assessment projects that non-oil GDP growth will continue to be strong, rising by 5.40% in 2024 and 5.30% in 2025, with hydrocarbons growing by 0.30% and 8.40%, respectively.

The UAE achieved a budget surplus of AED 85.60 billion, or 4.50% of GDP, in 2023. The Gulf country’s GDP grew 4.30% during the fourth quarter of the last year. In May 2024, the UAE’s seasonally adjusted Purchasing Managers’ Index (PMI) remained unchanged at 55.30.

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