UAE inflation in 2021 is lower than in many Western economies

The United Arab Emirates is one of the countries that can boast about its good economic situation. In 2021, after the first year of pandemic and all the negative effects that have impacted global economies, the nation has remained stable, recording fairly good figures despite the downsides. Inflation, for example, has held up and has even been able to stay below that of most Western economies and some neighbouring countries.

The UAE recorded a 2.5% inflation rate last year. The good figure is due to the fact that, according to economic experts, the nation has reduced commodity prices over the past three years, with the exception of August when they rose. Even so, the figure measured by the CPI - the Consumer Price Index - is much lower than expected, and is a considerably low figure when compared to Europe or the United States.

Analysts say that 63% of the Emirati shopping basket is accounted for by housing, transport and food. Last year's reports reveal that the cost of household and utilities decreased by 3.5% since 2020, helping to stabilise the price of many food items. It is worth noting that rents started to become significantly more common from the second half of 2021, as both rents and residential property prices have changed. This influences the construction of the CPI, although no significant pressure is expected by the time the survey is conducted again at the end of 2022.

Transport, on the other hand, had the least impact, with 18% less year-on-year in December. The reason for this, according to experts, is due to rising fuel and vehicle costs. Fuel rose by almost 48% in 2021 alone, and, from what is predicted, is likely to continue on an ever-increasing trend. On the other hand, the price of vehicles, both new and used, reflected an increase in their costs, as their production has been halted for quite some time by COVID. This is all the more remarkable as most of them are manufactured in China, and its economy was the first to be disrupted.

In the case of food, levels have risen both in the UAE and globally, although the nation has been able to stabilise its prices. Above all, it started to worsen in the last quarter of 2021, reaching almost 3.7% in December. The UN's Global Food Price Index shows that food inflation peaked in the middle of last year, and by the end of the year it was very high at 19% inflation. Even so, the Gulf country has been little affected, as it exports most of its foodstuffs and prices tend to fall and rise steadily.

In addition, the price of leisure and culture has also spiked as one of the sectors most affected by the pandemic, forcing them to raise prices further in order to recover, although the situation has since normalised.

On the international scene, the UAE has benefited, with few negative effects, compared to other more developed countries. In the UK, for example, following its exit from the eurozone, inflation exceeded 5 % and citizens were affected by higher energy, food and supply chain prices. Even the United States has been harder hit by rising costs, registering a rate of 6.8 %, according to its own CPI.

It is worth noting that China and Japan have not been affected to the same extent by inflation, even less so than the United Arab Emirates. The Asian giant recorded a rate of 1.5% in December, while the Japanese islands remained below 1% in the last months of last year.