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Factor Influencing Inflation Rate in The UAE

The inflation rate in the UAE is influenced by several factors. The 2008 global recession lowered inflation rates in the UAE from 12.3% in 2008 to 1.5% in 2009. Higher inflation in 2008 was also attributed to the weakening of the US dollar. Other factors that can increase inflation include rising money supply, government spending, increasing export industry and food prices. Cost-push inflation also influences inflation rates through increasing production costs, such as rising wages and import costs. Rising housing and utility costs have been a major driver of sustained inflation in the UAE in recent years.

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81 views4 pages

Factor Influencing Inflation Rate in The UAE

The inflation rate in the UAE is influenced by several factors. The 2008 global recession lowered inflation rates in the UAE from 12.3% in 2008 to 1.5% in 2009. Higher inflation in 2008 was also attributed to the weakening of the US dollar. Other factors that can increase inflation include rising money supply, government spending, increasing export industry and food prices. Cost-push inflation also influences inflation rates through increasing production costs, such as rising wages and import costs. Rising housing and utility costs have been a major driver of sustained inflation in the UAE in recent years.

Uploaded by

David Williams
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© © All Rights Reserved
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Factor influencing inflation rate in the

UAE
As per the economy of UAE has to provide a capital account with limiting foreign exchange
rates. The economy always providing some restricted scope for the facilitation of independent
monetary policy. the whole developing countries as also UAE affected in 2008 years by when
this time global recession all-over the world, as per the UAE domestic Bureau of Statistics,
when have seen most of the financial crisis also seen most envisaged in the form of lowering
of the inflation rates such as 12.3% in theirs of 2008 and in years of 2009 is 1.5%. At 2008 is
a financial year in this session exhibited the larger rates are also has been attributed to the
weakening of the dollar during this time therefore high inflation attributed and there has been
a sharp increase in the frequencies. Also, as a result, increase the food prices and the value of
imports. In a different perspective, the inhibiting factors included behind the inflation is
enhance through the higher level of demands. Thus, this may, in turn, to be attributed to some
factors such as an increase in money supply, government expenditure and expanding of the
export industry. According to meronomies theory, the aggregate demands has assessed to
increase the occurrence of inflation that is known as well as demand-pull inflation. Many
factors have been included in the aggregate demand such as an increase in the money supply,
government porches and in several exports. The main courses of raising export is a global
demand within the gross domestic markets may also an impact on the inflation rate (Khayat
et.al. 2003).

Another hand, increasing the production cost mainly occurred the inflation rate and that is the
reason as cost-pull inflation. Also, the increase in money wage rate and raise the price of raw
materials like oil and imports in case of a reduction of US dollar exchange rate. The government
policy of investment in several sectors of economy specific for the oil and gas industry can lead
to the developing economy in order to assess to reduce the inflation rate (Wilkins & Huisman
2011).

Those these factors have most relevant to the top economy of UAE being as well as most oil
exporting countries. As per the Ossman (2016) study, the UAE is the second biggest economy
country within the Middle East, it has been globally developed in terms of emerging as like
competitive global economies. The characteristic elements of the economy may be making a
more vulnerable to sustained inflation which can be attributed to higher trade and surplus per
year. Also, it is carried out the high per capita income and most innovative amount of
government expenditure on various developing sectors most specifically for oil and gas sectors.
Also, occurred on the cost of pats inflation when the production cost is increased. Therefore,
the increase may the money wage tares and increased the cost of raw materials used in
manifesting. The continued inflation has been enhanced in the past few years for the main
Couse of increasing housing cost according to the Head of MENA research at Emirates NBD.
Primary Couse is increased regarding the housing cost as like a fundamental factor that
occurred to the sustain inflation in the UAE and the production cost increased over these years
can be categorised as well as a cost-pull inflation characterized. The disintegration of cost as a
nation so like the housing and utility cost that has been attributed much more than 39% of the
customers are expenses also turn up by 2.4% from 2012 to 2013 in this year. Furthermore, the
food prices and so0pft drinks prices go through an increase of 2% in the inflation rates of a
UAE. Although, the construction industry leads the most innovative factors in the inflation
rates of the UAE. The UAE facing strong ricochet thus the construction projects going on due
to the increasing investment. The raising demands are leading towards another significant
drive to set the prices that are relevant to the consistent developing in the economic reasoning
huge of inflation as a 1% from 4% to 5%. Also, 247 of emirates evaluated from the consultancy
with an advisor that real estate sectors have increased in properties prices like increase in rents
as a most effective Couse of the rates of inflation over these years (Emirates24|7, 2019). T5his
has been the main reason for the last 10 years in the UAE.
References:

Emirates24|7. (2019). UAE inflation to remain low for years. [online] Available at:
https://www.emirates247.com/business/economy-finance/uae-inflation-to-remain-low-for-
years-2010-12-11-1.327752 [Accessed 2 May 2019].

Tradingeconomics.com. (2019). United Arab Emirates Inflation Rate | 2019 | Data | Chart |
Calendar. [online] Available at: https://tradingeconomics.com/united-arab-emirates/inflation-
cpi [Accessed 2 May 2019].

Ossman, G., 2016. Economic Indicators in the United Arab Emirates: Assessing the
Sustainability of the Country's Economic Performance. Advances in Economics and
Business, 4(5), pp.208-221.

Khayata, G.M., Rizk, D.E.E., Hasan, M.Y., Ghazal‐Aswad, S. and Asaad, M.A.N., 2003.
Factors influencing the quality of life of infertile women in the United Arab Emirates.
International Journal of Gynecology & Obstetrics, 80(2), pp.183-188.

Wilkins, S. and Huisman, J., 2011. International student destination choice: The influence of
home campus experience on the decision to consider branch campuses. Journal of Marketing
for Higher Education, 21(1), pp.61-83.

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