Gulf inflation to continue to rocket
Inflation in the Gulf is set to continue as the region prepares for a non-hydrocarbon future and important infrastructure work is completed, according to economists.
Across the Gulf, inflation is exceeding wage increases, leading to a significant erosion of purchasing power, reported a Dubai newspaper.
"The (recent) average cost of living increases were the highest in the UAE, Kuwait and Qatar, and have outpaced annual wage gains by more than 14%, 10% and 9%, respectively, signalling an acute deterioration of local buying power," Antonia Antonova, an analyst with Societe Generale Asset Management told the Gulf News.
Economists believe that it is the structural factors that are causing the price surge in the region. These will continue to have a medium to long-term impact as it is difficult to stop the reconstruction of the region's fast growing economies.
"The huge surge in regional liquidity has been channeled for economic diversification and infrastructure projects that have produced structural shortages causing general increase in prices," John Sfakianakis, group chief economist of the Saudi British said.
Antonova believes it is the huge amount of national infrastructure spending as well as economic spending on the non-hydrocarbon sector which means that the medium term outlook remains "tight".
"Both of these factors reflect various stages of economic restructuring underway in the region and neither factor can, no should, be easily reversed," Antonova said.
According to recent reports, official inflation rates in the UAE reached 9.3% last year, which can be attributed by the soaring rents, closely followed by escalating food prices. Source
Across the Gulf, inflation is exceeding wage increases, leading to a significant erosion of purchasing power, reported a Dubai newspaper.
"The (recent) average cost of living increases were the highest in the UAE, Kuwait and Qatar, and have outpaced annual wage gains by more than 14%, 10% and 9%, respectively, signalling an acute deterioration of local buying power," Antonia Antonova, an analyst with Societe Generale Asset Management told the Gulf News.
Economists believe that it is the structural factors that are causing the price surge in the region. These will continue to have a medium to long-term impact as it is difficult to stop the reconstruction of the region's fast growing economies.
"The huge surge in regional liquidity has been channeled for economic diversification and infrastructure projects that have produced structural shortages causing general increase in prices," John Sfakianakis, group chief economist of the Saudi British said.
Antonova believes it is the huge amount of national infrastructure spending as well as economic spending on the non-hydrocarbon sector which means that the medium term outlook remains "tight".
"Both of these factors reflect various stages of economic restructuring underway in the region and neither factor can, no should, be easily reversed," Antonova said.
According to recent reports, official inflation rates in the UAE reached 9.3% last year, which can be attributed by the soaring rents, closely followed by escalating food prices. Source
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