The UAE’s inflation rate will likely be the lowest that the country has seen in six years, according to a new report from BMI Research.
In a statement, BMI said that the UAE’s consumer price index – which tracks inflation – is set to hover around the 1.8% mark through 2017, thanks to the impact of subsidy cuts wearing off.
Inflation is the rate at which the cost of goods and services increases. Government subsidies help to keep inflation low thanks to the government subsidising the cost of these goods and services. However, UAE subsidy cuts in 2015 and 2016 meant that more costs were passed on to consumers.
However, according to BMI, the effects of those subsidies are beginning to wear off, and with a strong US dollar – to which the UAE dirham is pegged – inflation rates are set to stay low in 2017.
Indeed, the research firm said that house prices in the UAE are on a deflationary trend, thanks to a broader slowdown in the regional economy, as well as a spate of new construction projects due to be completed in 2017.
However, BMI said that the associated costs with housing, as well as food costs, are expected to be the main drivers of inflation in the UAE this year.
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