Economy

Dubai inflation falls to its lowest in five months

April 23, 2025, 6:06 AM

Ramadan food discounting and lower transport costs contributed to inflation hitting a five-month low in March in Dubai, though housing costs persist

Inflation rate of 2.8%
Lower food and transport costs
Housing prices still challenging

Dubai’s annual consumer price inflation fell in March to its lowest in five months, driven by lower transport and food costs, according to official data from Dubai Statistics Centre.

The headline CPI inflation rate declined to 2.8 percent on an annual basis, from 3.2 percent in each of January and February. That is the lowest since October.

Transport costs slipped 3.3 percent year-on-year, and food and beverage by 0.3 percent. Food and beverage is the second most heavily weighted item in the index. Clothing and footwear prices declined for a second month to 2.7 percent.

Housing and utilities, however, remain the main driver of inflation in Dubai, jointly accounting for around two-fifths of the basket.

They are growing the fastest. Prices rose 7.2 percent year-on-year in March, only slightly lower than February’s 7.4 percent.

“While there are some signs of stabilisation in the Dubai property market, with prices no longer accelerating, rents for apartments were up around 8 percent year-on-year in Q1, while villas and townhouses were up around 20 percent,” said Emirates NBD in a note.

According to Tom Harvey, general manager of commercial at supermarket chain Spinneys, various reasons underpin the slight decline in food prices.

“The holy month of Ramadan fell across March which is traditionally a time when greater discounts are offered across food retail,” he told AGBI.

“This can drive a mixed deflation impact as fewer value added goods are purchased due to fasting in daylight hours, and commodity goods taking a larger share of the basket.”

Another factor, he said, was declining international oil prices feeding into lower sea and air freight costs.

April, however, may be different. The US dollar has fallen against all major currencies, including the euro and British pound. Through its peg to the dollar, that could make UAE dirham denominated prices for imported goods – including food – more expensive.

However, the outlook for the US dollar is “anything but clear”, Harvey said.