Dubai’s annual inflation eased to 2.79% y-o-y in March — the slowest pace of price growth since October, according to the Dubai Statistics Center (pdf). March’s reading also marks a drop from the 3.15% recorded in February.

The usual suspects are driving price growth: Prices for housing, water, electricity, gas, and other fuels — the largest component in the inflation basket — rose 7.16% in March, easing slightly from February’s 7.36% increase but continuing to be the main driver of inflation.

Segments seeing deflation: Transport prices, making up just over 9% of the index, fell 3.34% y-o-y in March, largely driven by a 9.9% drop in the cost of super 98 petrol compared to March 2024, according to Emirates NBD’s annual inflation report (pdf). The food and beverage, clothing and footwear, and information and communication sectors also recorded slight price drops.

On a monthly basis, prices declined by 0.11%, registering the first instance of monthly deflation since July 2024, according to monthly figures from the statistics center’s monthly inflation report (pdf).

Looking ahead: Despite a 1Q inflation average reading of 3.0%, headline inflation is expected to continue to soften over the coming months, largely due to lower oil prices, making it likely that the transport segment will keep dragging down the reading, Emirates NBD suggested. Property prices are also showing signs of stabilizing, with rents up 8% for apartments and 20% for villas in 1Q, showing less signs of acceleration, while signs of broader deflation in the rest of the basket buoys its forecast of more moderate inflation throughout the rest of the year.

How that compares: The bank maintains a full-year inflation forecast of 2.8% for Dubai, while the CBUAE has pencilled in a 2.0% inflation rate for the UAE this year, matching the IMF’s estimate.

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