UAE: Inflation Rate Falls 3.34 Percent Due to COVID-19

Published May 22nd, 2020 - 06:00 GMT
UAE: Inflation Rate Falls 3.34 Percent Due to COVID-19
The UAE reported the first case of coronavirus on January 29 and the number of total cases increased to 25,063 on Tuesday with 10,791 recoveries and 227 deaths. (Shutterstock)
Highlights
Dubai Statistics Centre data showed that the annual general consumer price index fell by 3.34 per cent in April 2020 compared to the same period in 2019.

Overall inflation in the UAE witnessed a considerable decline of 3.34 percent during the first four months of 2020 as the Covid-19 pandemic impacted consumer demand and economic growth. However, prices of some basic commodities including food and beverages (F&B) rose due to transport restrictions in the wake of the coronavirus outbreak.

The latest reports indicate that inflation will remain muted during the remainder of the year. Data shows that prices of F&B, therapeutic appliances, basic goods and services and personal care items increased while utility charges, transportation, education, and household appliances saw a drop due to government initiatives and lower demand.

Work-from-home, distance learning, and UAE residents limiting their purchases to essentials led to a decline in transport, household equipment, entertainment and culture, utility and fuel costs, etc. Data also showed that prices of F&B surged 10 percent while those of basic goods and services rose by five percent in the UAE during the first four months of the year. The prices of personal care and therapeutic appliances item prices surged by 20 and 25 percent, respectively.

These figures are lower than in some other Mena countries. When prices are compared to other Mena countries, prices in some regional countries such as Jordan, Tunisia, and Sudan increased by up to 200 percent due to the pandemic. However, other Bahrain and Saudi Arabia prevented price changes, said the report.

The UAE reported the first case of coronavirus on January 29 and the number of total cases increased to 25,063 on Tuesday with 10,791 recoveries and 227 deaths.

Anurag Chaturvedi, CEO of Chartered House, said falling prices in March and April are likely to drag the inflation rate further down during the remainder of the year, far below last year's average.

"The meltdown in oil prices will likely cause energy prices to end the year down. A coronavirus-induced slowdown in the UAE economy has resulted in some significant price declines," said Chaturvedi.

"There is a moderate decline in car and truck rental charges by 10-15 percent. New-car prices are likely to trend down a bit because of lower demand. Fashion and apparel prices have softened, as inventory piles up. Insurance companies are offering rebates/offers for general insurance categories, which lowers the price index. Even after lockdowns are lifted, spending at restaurants will likely be hurt by both virus concerns and lower consumer willingness to splurge on something that is not a necessity, so menu prices will not rise," he added.

But there are exceptions such as food prices, households, electronics, social media, technology prices are experiencing an increase and will continue to rise in the second half of the year, said Chaturvedi.

Locally, the latest data released by Statistics Centre - Abu Dhabi on Wednesday also showed that consumer prices increased 0.9 percent in April to 108.6 points in April 2020, up from 107.6 points in March 2020. Average consumer prices declined by two per cent from January to April of 2020, the report said.

"UAE consumer prices weaken with Covid-19. Inflation reflects the impact of the pandemic on the real economy," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Dubai Statistics Centre data showed that the annual general consumer price index fell by 3.34 percent in April 2020 compared to the same period in 2019.

Prices of housing, water, electricity, gas, and fuel division decreased by 6.30 percent, transportation sector by 12.34 percent, the entertainment and culture section by 11.41 percent, clothing and footwear by 6.44 percent.

While the consumer price index for food and beverage increased six percent, the education section by 1.87 percent, tobacco by 14.90 percent, the furniture and furnishing section, and household appliances by 0.47 percent, restaurants, and hotels by 0.12 percent and healthcare by 0.07 percent.


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