The Central Bank of the UAE has revised the inflation forecast for the country this year to 2.3%, down from its previous projection of 2.5%.

The downward revision is due to lower-than-expected increases in commodity costs, incomes and rents, the banking authority said in its latest quarterly economic review.

“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 central bank said.

Next year, inflation is forecast to also average at 2.3%, mainly driven by the non-tradeable component of the consumer basket.

Dubai inflation

During the first quarter of the year, Dubai’s headline inflation moderated at 3.4%, which was below the global average.

The figure accelerated to 3.9% in April alone, due to a significant increase in transport prices, which account for the third largest category in Dubai’s consumer basket.

The central bank also noted that Dubai’s housing group prices (including rent, in addition to water, electricity, gas and other types of fuel, representing 40.7% of the consumer basket) continued to increase, reaching 6.5% on an annual basis in April, after averaging 6.3% year-on-year in the first quarter.

As for the food and beverage group, which is the second largest group in the consumer basket, inflation declined to 2.3% during the month, from an average of 3.3% in the first quarter.

The rate of inflation in all other categories of the emirate’s consumer basket also dropped or remained unchanged in April 2024, except clothing and footwear, health, recreation, sport and culture, as well as restaurants and accommodation services.

(Writing by Cleofe Maceda; editing by Seban Scaria)