Increasing import costs and a delay in the formation of a Gulf single currency may lead the states to change their currency regimes in the “medium term,’’ said analysts including Ala’a Al Yousuf, chief economist of Gulf Finance House, in an e- mailed research report on Wednesday.
Gulf Finance joins CFC Seymour Ltd., which last week predicted that the UAE dirham would gain 5 per cent against the dollar in 2009 after the state abandons the dollar peg. Contracts to buy UAE dirhams in 12 months’ time fell to 3.6355 today, a 0.2 percent decline since July 22, indicating the two reports have had little impact on market speculation.
“We still believe there is room for a regime shift over the medium term, given the likely persistence of mounting imported inflationary pressures and possible delays to monetary union,” said Al-Yousuf in the report.
Inflation has accelerated above 10 per cent in five of the six Gulf Cooperation Council states as oil-fueled economic growth creates shortages of real estate and services, while the weaker dollar and surging global food prices increase import costs.
