Consumer prices in the six-nation bloc will rise an average 8.4 per cent in 2009, compared with 10.2 per cent in 2008, according to the median estimate of four analysts surveyed by Bloomberg News this month.
Inflation has accelerated to records across the Gulf as oil-fueled economic growth creates shortages of housing and services, while the weaker US dollar and higher global food prices have made imports more expensive. The pick-up in inflation has prompted calls for the Gulf states to end their currency pegs to the dollar.
“Current higher inflation should be regarded as a spike that is short term in nature,’’ said Giyas Gokkent, head of research at National Bank of Abu Dhabi, the emirate’s largest bank by market value, in an e-mail. “A similar episode occurred in the 1970s energy boom.’’ Inflation in Saudi Arabia, the largest Arab economy, will slow to 7.1 per cent in 2009 from 9.7 percent this year, according to the survey. In the UAE, consumer prices will rise 10 per cent in 2009, compared with 12 per cent in 2008.
Qatar will continue to experience the fastest inflation in the region at 11.5 per cent in 2009, compared with 14 per cent this year, the economists said.
Pressure Eases All of the GCC states, except Bahrain, have reported inflation above 10 per cent this year, sparking calls for a revaluation of Gulf currencies against the dollar. Slower inflation is likely to reduce pressure to revalue.
“Inflation is temporarily fuelled by the sharp rise in energy prices, population influx, which has caused a housing shortage, and higher food prices globally,” said Gokkent. “The housing shortage is temporary until new supply comes on stream.” Supply of office space in Dubai will begin to outstrip demand in 2009 as new projects are finished, HSBC Holdings Plc. said in a report yesterday. Demand will continue to exceed supply through 2010 in neighboring Abu Dhabi, the report said.
Some food prices are already falling. Rough rice futures peaked at $ 22.43 per 100 pounds on April 23, and were trading at $ 17.94 at 9.32 a.m. in London. Wheat futures have fallen 34 per cent since March 12.
Nymex WTI crude will average $ 110 per barrel in 2009, down 25 per cent from today’s price of about $ 146, according to the Bloomberg commodity price forecast of 31 analysts.
The GCC is a six-nation political and economic grouping of Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain.
