Dubai Inflation Eases to 2.9% in December 2024, Forecast at 2.8% for 2025

UAE, 23 January, 2025 : Dubai’s Consumer Price Index (CPI) inflation eased to 2.9% year-on-year (YoY) in December 2024, down from 3% in November, Emirates NBD Research reported. This brought the annual average for 2024 to 3.3%, unchanged from 2023, following a significant drop from 4.7% in 2022.

Inflation is expected to slow further to 2.8% in 2025, driven by declining transport costs, which account for 10% of the CPI basket. Transport prices fell 4.9% YoY in December, improving from a 10.6% drop in October. Lower oil prices contributed to this trend, with Super 98 petrol priced at AED 2.61 per litre in January 2025, 7.5% lower than the same period in 2024.

Brent crude prices are projected to average $73 per barrel in 2025, down from $80 in 2024, keeping transport a deflationary factor. Other CPI components, including food and beverages, remained soft, while sectors like tobacco, restaurants, and clothing recorded deflation.

A strong US dollar continues to suppress price pressures across the CPI basket, supported by favorable interest rate differentials and global uncertainties. Competitive business dynamics in Dubai have also limited firms' ability to raise prices, despite squeezed profit margins.

Housing, which makes up 40% of the CPI basket, remains a key inflationary driver. Housing prices rose 7.2% YoY in December, contributing to a 6.7% annual average increase in 2024. Rental and purchase costs have surged, with apartment prices up 65% and villa/townhouse rates doubling since December 2020.

Emirates NBD Research forecasts UAE GDP growth of 5% in 2025, alongside easing inflation trends in Saudi Arabia, where CPI inflation dropped to 1.9% YoY in December 2024.