UAE inflation estimated at 14%
Inflation in the UAE may have surged to a record 14% in 2007 as a result of strong domestic demand, reported Emirates Business 24/7 quoting a semi-official report.
"The phenomenon has become one of the most debated issues in the UAE because of accelerating inflation rates," the report from the Abu Dhabi Chamber of Commerce and Industry, citing government estimates, said.
"Inflation has steadily risen over the past three years to reach an alarming level in 2007, when it was estimated at as high as 15%. One of the root causes of this problem is the wave of hikes in petrol and diesel prices in the country, as such increases have led to higher construction costs, slashed the profit margin of the contractors and prompted house owners to raise rents sharply."
"The economic boom is another key factor for inflation, as it has led to a surge in domestic demand and this is normal in any country passing through a boom period. Growth rates over the past five years exceeded 15% in current prices and the pace is expected to be maintained in the coming years."
Dollar pegs force the UAE and four of its GCC partners, including Saudi Arabia and Qatar to track US monetary policy at a time when the Fed has been cutting rates to contain the fallout of a mortgage crisis and a weakening economy.
Pressures have been mounting in Gulf states to review the policy of pegging their currency to the weak US dollar, and analysts have suggested that revaluation, not a de-pegging would help in lowering consumer prices.
Earlier this week, Merrill Lynch said the US has effectively given Gulf Arab states the go ahead for making changes to their dollar-pegged foreign exchange policies, by recognising inflation as a problem.
In a report entitled 'US Green Light for the GCC', the US investment bank said the UAE and Qatar will probably move to a currency basket in the next few months, with their respective currencies appreciating 5% before the end of the year."
Citing a US Treasury report to Congress that for the first time mentioned currency and inflation issues in the six-member Gulf Cooperation Council, Merrill said the United States government had become more confident about the outlook for the dollar and therefore did not necessarily need Gulf support for its currency.
Saudi Arabia is unlikely to follow until late next year, Merrill said in the report.
Saudi inflation surged to a a 27-year high of 10.5% in April from 9.6% the previous month, government data showed last week.
In March of this year, Qatar sold its first certificates of deposits as it struggles with inflation at almost 14%.
With an inflation rate of 14%, the UAE would be suffering from one of the highest inflation rates in the region along with Qatar.
"The phenomenon has become one of the most debated issues in the UAE because of accelerating inflation rates," the report from the Abu Dhabi Chamber of Commerce and Industry, citing government estimates, said.
"Inflation has steadily risen over the past three years to reach an alarming level in 2007, when it was estimated at as high as 15%. One of the root causes of this problem is the wave of hikes in petrol and diesel prices in the country, as such increases have led to higher construction costs, slashed the profit margin of the contractors and prompted house owners to raise rents sharply."
"The economic boom is another key factor for inflation, as it has led to a surge in domestic demand and this is normal in any country passing through a boom period. Growth rates over the past five years exceeded 15% in current prices and the pace is expected to be maintained in the coming years."
Dollar pegs force the UAE and four of its GCC partners, including Saudi Arabia and Qatar to track US monetary policy at a time when the Fed has been cutting rates to contain the fallout of a mortgage crisis and a weakening economy.
Pressures have been mounting in Gulf states to review the policy of pegging their currency to the weak US dollar, and analysts have suggested that revaluation, not a de-pegging would help in lowering consumer prices.
Earlier this week, Merrill Lynch said the US has effectively given Gulf Arab states the go ahead for making changes to their dollar-pegged foreign exchange policies, by recognising inflation as a problem.
In a report entitled 'US Green Light for the GCC', the US investment bank said the UAE and Qatar will probably move to a currency basket in the next few months, with their respective currencies appreciating 5% before the end of the year."
Citing a US Treasury report to Congress that for the first time mentioned currency and inflation issues in the six-member Gulf Cooperation Council, Merrill said the United States government had become more confident about the outlook for the dollar and therefore did not necessarily need Gulf support for its currency.
Saudi Arabia is unlikely to follow until late next year, Merrill said in the report.
Saudi inflation surged to a a 27-year high of 10.5% in April from 9.6% the previous month, government data showed last week.
In March of this year, Qatar sold its first certificates of deposits as it struggles with inflation at almost 14%.
With an inflation rate of 14%, the UAE would be suffering from one of the highest inflation rates in the region along with Qatar.
No comments:
Post a Comment