Overview
Inflation in the UAE has remained structurally moderate compared to global peers, anchored by the dirham’s peg to the US dollar and a government-administered pricing regime for essential goods. Understanding inflationary pressures is critical as the economy scales non-oil sectors that carry different cost structures than the hydrocarbon base.
Current Landscape
The UAE’s Consumer Price Index has reflected a nuanced pattern since 2023. Housing and utilities, which carry the heaviest CPI weighting, have driven headline figures as rental markets tightened in Dubai and Abu Dhabi. Food and transport costs have been partially offset by subsidy programmes and fuel-price stabilisation mechanisms. Core inflation – excluding volatile food and energy – has trended between 2.0 and 3.2 percent, signalling underlying demand-side warmth without overheating.
Data & Metrics
| Indicator | 2024 | 2025 (Est.) | 2026 (Proj.) |
|---|---|---|---|
| Headline CPI (% YoY) | 2.3 | 2.6 | 2.8 |
| Core CPI (% YoY) | 2.0 | 2.4 | 2.7 |
| Housing & Utilities Weight | 33.3% | 33.3% | 33.3% |
| Food & Beverages Weight | 13.2% | 13.2% | 13.2% |
| Rent Index Change (Dubai) | +8.4% | +6.1% | +4.5% |
Policy Framework
The Central Bank of the UAE (CBUAE) mirrors US Federal Reserve rate decisions due to the dollar peg, leaving limited independent monetary manoeuvrability. Fiscal tools – including administered fuel prices, electricity tariff bands, and strategic commodity reserves – serve as the primary inflation-management levers. The Ministry of Economy operates a price-monitoring programme that tracks over 10,000 items across all seven emirates.
Vision 2031 Implications
Maintaining low and predictable inflation is foundational to the UAE’s 2031 competitiveness agenda. As non-oil GDP grows, the composition of inflationary pressures will shift toward services and wages rather than commodity imports. Policymakers will need to balance cost-of-living affordability with the wage growth required to attract and retain high-skill talent. The planned expansion of social housing stock and continued investment in food-supply logistics are expected to moderate two of the largest CPI components through the decade.