Inflation in UAE, other emerging markets to ‘fall consistently’ in 2023

Inflation in UAE, other emerging markets to ‘fall consistently’ in 2023

Sovereigns in the emerging market (EM) region, which includes the UAE, can expect inflation levels to fall consistently in the coming year, but financial conditions will remain tight, according to a new report from Moody’s.

After peaking in 2022, consumer prices next year are set to ease as a result of monetary policy tightening, with the UAE expected to see inflation falling below 5%, lower than the forecast for other countries like Egypt, South Africa, India, Mexico, Hungary, Poland, Romania, Nigeria, Chile and Colombia.

However, Moody’s said that a transition to lower inflation rates could take time.

“EM inflation will peak in 2022 and then fall consistently in 2023 as monetary policy tightening slows demand and supply-chain disruptions normalise,” Moody’s said.

By the end of 2022, inflation in more than 50% of emerging markets will exceed 6%, compared with only one-fifth of EMs hitting that level in 2019. Inflation will continue to be driven by food and fuel costs, as they account for a huge chunk of the consumer basket.

UAE inflation

Consumers have been feeling the impact of higher cost of commodities and other basic essentials. Headline inflation in the UAE surged to 6.8% in the second quarter of the year from 3.4% in the