Statistics Center- Abu Dhabi (SCAD) issued this week its first detailed report on consumer prices index (CPI) and the rate of inflation in the Emirate of Abu Dhabi. According to the report, the rate of inflation in the Emirate has dropped to only 1.17% during the first nine months of the current year, compared with the same period last year, as evident from the consumer price index.
Statistics Center – Abu Dhabi (SCAD) will be releasing its CPI report periodically, Considering that the report will constitute the only authorized source to monitor price developments and inflation in the Emirate of Abu Dhabi. The report follows a precise methodology for calculating all official indicators related to prices movements within the emirate and is based on a broader and more representative basket of goods and services, thus enabling a more accurate calculation of the index, and putting an end to the conflicting figures and estimates concerning the rate of inflation in the Emirate of Abu Dhabi.
In this report, the index base year has been shifted to 2007, on the basis of the data obtained from the household income and expenditure survey that was carried out in Emirate of Abu Dhabi during 2007 / 2008. The updating of the base year included updating of the weights of the index basket and assigning of 2007 prices as the base prices for the new index.
The report computed the inflation rate on the basis of the percentage rate of change in the overall index, which rose from 114.05 during the first nine months of 2008 to 115.38 over the same period in 2009. The percent change in the index represents the rate of inflation for the first nine months of this year.
The sub-index for “Food and Beverages” group which has a relative weight of 16.1 decreased by 2.87% over first 3 quarters of 2009 upon year-on-year comparison with 2008 figures, while the sub-index for the “Clothing and Footwear” group, with a relative weight of 9.8, declined 3.37%. The “household furnishings and equipment” group, which has a weight of 4.8, decreased by 2.48%. The sharpest decline was observed in the “recreation and culture” group, whose sub-index fell 5.6%. However, the relative weight of this group is only 2.4, explaining its limited impact in reducing the overall rate of inflation. The sub-index for the Communications Group (relative weight7.7) edged down slightly by 0.06%.
According to the report, the aforementioned five groups have a combined relative weight of about 41% of the overall consumer prices index and therefore largely account for the drop in inflation during the first nine months of 2009, due to a marked decline in the prices of their component goods and services.
On the other hand, the sub-index for some commodity groups had risen slightly during the first nine months of this year. Foremost among these was the “housing, water, electricity and gas” group, the sub-index of which surged by 4.94%, giving it the strongest impact on the overall rate of inflation, especially since the relative weight of this group is 37.9 of the overall index.
According to SCAD’s report, the overall rate of inflation for in the Emirate of Abu Dhabi the first nine months of this year declined from 14.88% in 2008 to 1.17% on a year-on-year basis. The steep decline is one of the (rare) favourable impacts of the global financial crisis on the economy of the Emirate of Abu Dhabi. In addition the appropriate policies and practical measures taken by the higher leadership during the first half of last year had been instrumental in reining in inflation to this record low.
The significantly low inflation rate points to the strong and stable economy of the Emirate of Abu Dhabi and demonstrates its considerable competitive advantage at the regional and global levels. The report findings further enhance the emirate’s appeal to domestic and foreign investment, given that the rate of inflation and price levels is one of the important economic criteria used to assess the investment climate and risks in any country.
This low rate of inflation provides a good measure of certainty that the future plans and economic development strategies of the Emirate of Abu Dhabi will be implemented in accordance with the timetables laid out for them, with minimal concerns about the constraints posed by inflation and prices fluctuation. In the meantime SCAD’s periodic CPI report will provide a reliable and accurate source of information in the effective management of inflation and related challenges.
The report concludes by emphasizing the record drop in the annual inflation rate in the Emirate of Abu Dhabi over the first 3 quarters of the current year, with expectations that this trend will continue through the remaining three months of the year, providing better opportunities for further growth and financial and economic stability in the emirate.
