Wednesday, May 16, 2007

Increase in housing supply to drop inflation rates; Central Bank

The Governor of UAE Central Bank, Sultan Nasser Al Suwaidi, has mentioned that UAE is likely to witness substantial decline in inflation rates, once more housing units enters the market.

Al Suwaidi mentioned that even during the previous year, the inflation rates in the UAE was not alarming, though, it is a fact that UAE has a high single digit inflation, which is expected to come down considerably when new supplies take care of the property demand. The inflation has always been below ten percent, he added.

Al Suwaidi mentioned this based on the comments by the Director of International Monetory Fund (IMF), Mohsin S. Khan, that the inflation in UAE is expected to cross ten percent and Dubai, in particular, is expected to witness higher rate of inflation.

However, Al Suwaidi agrees with the observation made by IMF that the abnormal high rent rates, scarcity of housing units and the overall constraints in supply are the main factors contribution the high inflation rates rather than the high cost of imports due to the fall of the dollar.

The declining dollar value, to which the dirham is hooked, has resulted in a drop in the purchasing authority of the dirham as against many international currencies. Though, this has in-turn added to the current inflationary pressures, the Government has highlighted that imported inflation plays only a marginal role in the UAE.

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