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Cost of living has decreased in the UAE

Cheaper food, transportation and housing have reduced burden on consumer, expert says

Food prices in the UAE have shown a decrease compared to prices in the same period last year. According to Dr Cedwyn Fernandes, economist, pro-vice chancellor and director, Middlesex University Dubai, “Worldwide, food prices are on a downward trend and the FAO Food Price Index has fallen by 3.6 per cent when compared to March 2018. The trend is neutral and prices of food are not expected to rise worldwide.”

He added: “In the UAE, food prices have shown a marginal decrease of 0.74 per cent when compared to March 2018, a reflection of the weak demand conditions.”

In the UAE, did VAT impact prices? “Implementation of VAT in January 2018 coincided with the deflationary trend in fuel and commodity prices worldwide and a glut of housing supply in the UAE,” Dr Fernandes said. “As a result, the impact of VAT has not been reflected on prices in the UAE.”

The other good news is that the cost of living has also fallen in the UAE compared to last year. The Consumer Price Index (CPI) has fallen by 2.5 per cent in March year on year, Dr Fernandes said.

 

“The major reason for this is the reduction by 5.27 per cent in transportation and 6.54 per cent in housing costs. Both these components total a 48.7 per cent of the CPI basket of goods and services. In effect, living costs in the UAE have fallen reducing the burden on the consumer.”

On fuel prices, Dr Fernandes said: “In comparison with March 2018, transportation costs reduced as fuel prices were lower this year. The trend of fuel pricing not rising substantially is likely to continue unless geo-political factors impact on oil producing countries, pushing up prices.”

The key trend to look out for, said Dr Fernandes, is the impact of geo-political issues on fuel prices.

“As an important oil producer, an increase in oil prices has a dual effect on the UAE economy,” he said. “Higher oil prices boost government revenues and in turn leads to higher spending by the government especially in physical and social infrastructure which leads to higher productivity in the economy. At the same time, higher oil prices will lead to higher inflation impacting negatively on the consumer. The UAE Government at the federal level and in each of the emirates has initiated measures to reduce government fees and related costs which must be continued to negate any impact on higher fuel prices and also boost the business environment.”

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