Dubai inflation eases to 2.3% in April as fuel prices drop, housing remains key driver

21/05/2025 02:08 AST

Dubai's annual inflation rate slowed to 2.3 per cent in April, down from 2.8 per cent in March, according to data released on Tuesday.

This marks the slowest pace of annual price growth since mid-2023, driven largely by a significant drop in petrol prices, which helped offset continued upward pressure from housing costs, according to Emirates NBD Research.

On a monthly basis, consumer prices rose 0.3 per cent, reversing the 0.1 per cent decline recorded in March. So far in 2025, average annual inflation stands at 2.8 per cent, aligning with Emirates NBD's earlier forecasts.

"With oil prices expected to remain under pressure for the rest of the year and most other components of the basket showing only weak price growth, we have revised our inflation projection down to an average of 2.5 per cent for 2025, compared to 3.3 per cent in 2024," said Daniel Richards, Senior Economist at Emirates NBD.

Housing costs continue to dominate inflation
Housing remains the largest and most inflationary component of the consumer price index (CPI), accounting for around 40 per cent of the basket. Although housing inflation moderated to a seven-month low of 7.0 per cent year-on-year in April, it remains elevated, only slightly down from 7.2 per cent in March. Month-on-month, housing prices rose 0.4 per cent, unchanged from the previous month.

"Rent increases have been slowing, with the general average up 9.8 per cent year-on-year in April-the slowest pace since December 2021. This suggests some easing of housing-related pressure on headline CPI," Richards noted.

Education and healthcare see slower price growth
Beyond housing, education and healthcare have been the other notable contributors to inflation. Education, which makes up 8.2 per cent of the CPI basket, saw prices rise 2.5 per cent year-on-year in April, down from 2.8 per cent in March. Healthcare, accounting for 0.9 per cent of the basket, recorded a 3.0 per cent increase, slightly lower than the 3.1 per cent seen the previous month.

Earlier this month, the Knowledge and Human Development Authority (KHDA) set the education cost index for private schools at 2.4 per cent for the 2025/26 academic year, compared to 2.6 per cent for 2024/25, which could help moderate education inflation going forward.

Other categories show weak or negative inflation

Most other components of the CPI basket showed either weak inflation or outright deflation. Food and beverages was down 0.2 per cent year-on-year. Restaurants and accommodation gained 0.6 per cent, compared to 0.3 per cent in March. Clothing and footwear fell 2.8 per cent, as retailers continue to offer discounts. Household furnishings rose 0.5 per cent, slightly higher than 0.4 per cent in March.

Transport prices drive down headline inflation
Transport, which makes up about nine per cent of the CPI basket, remains a key variable due to its sensitivity to global oil prices. In April, transport prices fell 7.6 per cent year-on-year, a sharp drop from the 3.3 per cent decline in March. This reflects a significant decrease in fuel costs - a litre of Super 98 petrol in April 2025 was 18.4 per cent cheaper than a year earlier.

In May, Super 98 is priced at Dh2.58 per litre, just one fil higher than in April but still 22.8 per cent lower than the Dh3.34 per litre recorded in May 2024.

"With oil prices forecast to average $68 per barrel in 2025, down from $80 in 2024, transport will continue to exert downward pressure on headline inflation," Richards added.

Dubai's inflation outlook for 2025 appears moderate, with falling fuel prices and easing rent growth helping to contain overall price pressures. However, housing remains a key area to watch, given its outsized influence on the CPI.

Khaleej Times