Dubai inflation hit 5.5 per cent in May as the US-Iran war lifted fuel, transport and imported food prices, adding to cost-of-living pressures.
Emirates NBD said the figure was slightly above its 5.4 per cent forecast and sharply up on the 4.8 per cent recorded in April, at the height of the conflict.
“We expect annual inflation to tick up slightly further in June before moderating from July, as lower oil prices and improved shipping flows reduce imported price pressures,” Dan Richards, senior economist at the bank, wrote in its July 1 report.
“We forecast inflation to slow to 2.9 per cent year-on-year by December.”
On Tuesday, the UAE government committee that sets monthly petrol prices cut the price at the pump by 14 per cent for petrol and 17 per cent for diesel, in line with falling global prices.
Petrol prices, which are largely unsubsidised in the UAE, rose by 60 per cent at the height of the war. They remain about 35 per cent higher today than in January.
“Food and beverages, which make up 9.6 per cent of the basket, have also seen a sharp acceleration since the conflict began,” Mr Richards wrote.
“Even so, inflation in the category slowed to 6.7 per cent year-on-year in May from 7.7 per cent in April, while prices fell 0.4 per cent month-on-month after strong gains in March and April.
“Hospitality firms appear largely to be absorbing higher input costs as they seek to support demand.”
Dubai's economy has largely resisted the slump speculated by some analysts, with housing sales and rent holding up. Many residents have found landlords holding rents steady or even increasing them on renewal.
“Housing and utilities, the largest component of the basket at 37.5 per cent, remained a persistent source of price pressure,” Mr Richards added.
