Country Report United Arab Emirates May 2011

Outlook for 2011-15: Inflation

The NBS compiles monthly statistical data at a federal level and has changed its base year for inflation to 2007 for data from 2008 onwards. Official estimates indicate that average annual inflation was by 0.9% in 2010. As the economy recovers and oil and international commodity prices increase, we expect inflationary pressures to re-emerge gradually, especially in light of the projected expansion in infrastructure development. We expect inflation in 2011 to average 2.5% owing to an increase in prices of grains, sugar and other basic items. However, low housing costs will keep inflation at a manageable level, at an average of 2.2% in 2011-15. The official basket used by the UAE government is representative of prices faced by the local Emirati population-who benefit from extensive subsidies-rather than the expatriate community, who make up almost 90% of the labour force. The authorities have announced that the composition of the price basket is under review.

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