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Dubai’s inflation is accelerating at a much slower pace than last year, thanks in part to moderating food prices and a drop in transportation costs.
Inflation in the Middle East’s main business hub reached just over 2% in June, the lowest level since early 2022. A gauge tracking transportation costs dropped nearly 14% on an annual basis, according to the city’s statistics authority.
“The dis-inflationary momentum is being driven by the transport and food components, reflecting global food and oil prices are back to pre-Ukraine levels,” according to Carla Slim, an economist at Standard Chartered Plc. Still, she expects the city’s inflation to remain above its historical average and the pre-Covid base given prices pressures in the housing sector.
Wheat prices have dropped this year after surging in the wake of Russia’s invasion of Ukraine in 2022. Yet Russia’s decision to end an agreement that allowed for shipments of food from Ukrainian ports has increased concerns about rising grain costs globally. Ukraine is the third-largest exporter of corn and the sixth-largest wheat shipper.
Last year, a flock of crypto millionaires, bankers and some wealthy Russians seeking to shield their assets drove up rent in Dubai to record highs. Inflation reached 7%, the highest level ever recorded.
Housing makes up more than a third of the city’s consumer price index.
The drop in overall cost pressures has been helped by energy prices easing since mid-2022, according to Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. The United Arab Emirates, of which Dubai is a part, increased fuel prices to record highs last summer.
“The drag from this sector will be particularly large in June as that’s when the oil price peaked last year,” she said.
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