UAE inflation continues easing in March after tax boost

Consumer price inflation in the United Arab Emirates continued to ease in March after hitting a multi-year high in January when the government imposed a 5 per cent value-added tax, official data showed on Monday.

Annual inflation dropped to 3.4 per cent last month from 4.5 per cent in February and 4.8 per cent in January, which was the highest since 2015. Month-on-month, consumer prices fell 0.7 per cent in March.

Read: UAE inflation jumps with VAT but restrained by housing

Some companies have been discounting to maintain marketshare after initially hiking prices more sharply in response to the tax.

For example, food and soft drink prices rose 4.9 per cent year-on-year in March, slowing from a jump of 6.5 per cent in February, and fell 1.7 per cent from the previous month.

Several other categories, including furniture and household goods, also dropped month-on-month.

In addition, housing and utility prices, which account for more than a third of the entire consumer basket, sank 1.2 per cent year-on-year in March because of a weak real estate market in the UAE, which is pushing down residential rents in Abu Dhabi and Dubai.