Barclays: UAE experiencing deflation

Emirates 24|7:

Inflation will reverse from an average of 12.3 per cent in 2008 to -1.5 per cent in 2009, Barclays Capital said in a report. The decline in CPI inflation in the UAE is expected to increase in the second half of this year, it said in a report.

In spite of the government's expansionary fiscal policy and liquidity injections, the mounting deflationary pressures are likely to stay till the end of the year, Barclays Capital said.
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Continuing weakness in domestic demand, driven by a projected decline in population and falling wages, would be a key short-term driver.

Besides, sustained easing of food price pressures globally; and depressed real estate prices that should drive rental prices to even lower levels (notably in Dubai) would act as other factors contributing to the trend, the report said.

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