Falling property prices pull inflation to nine-year low

The National -

Falling property prices pulled the inflation rate down to a nine-year low last year, Government figures show.

Inflation ran at 1.6 per cent last year, while consumer prices for December eased 0.7 per cent.

That represents a sharp reversal from the year before, when UAE inflation reached 12.3 per cent, the second-highest in the GCC.

A credit-driven property bubble supported by rising oil prices fuelled inflation across the region before the financial crisis. The decline in the price of oil and weakening of property prices helped relieve inflationary pressures across the region.

Economists broadly expect inflation to edge up this year as the cost of imported food and a stabilisation in the property market drive prices higher. High inflation can reduce the value of money, while concerns about future inflation can deter foreign investment.

National Bank of Abu Dhabi (NBAD) has forecast inflation of 2.3 per cent this year, while EFG-Hermes predicts 2 per cent.

The IMF is expecting inflation of 1.5 per cent this year, up from 1 per cent last year, Sultan al Suwaidi, the Governor of the Central Bank, said this month.

The inflation rate in Abu Dhabi was 0.78 per cent last year, while Dubai recorded 4.06 per cent.