UAE may face deflation, says Deutsche Bank

The inflation rate in the UAE may turn negative in the second half of the year, pulled down by housing and food prices, Bloomberg reported citing a Deutsche Bank note to clients.

“Headline inflation has declined sharply year-to-date and looks set to slip into negative territory,” Caroline Grady, a London-based economist for the bank, wrote in the note. “Our expectation of further declines in real estate prices would drag the housing component lower and a widening output gap will keep price pressures subdued more generally.”

“A rebound in global trade should help Dubai but the pullback in construction and infrastructure spending suggests a return to previous high growth rates is unlikely,” the report said. “Abu Dhabi should fare better.”