Data and projections: April 2024

Chart of the quarter: Inflation cools in the GCC

Inflation cooled in the GCC during 2023, with our composite for the region averaging 2.6% and ending the year at 1.7% y/y, down from a post-Covid high of 4.3% in July 2022. (The uptick to 2.2% in January was mainly due to a base effect for Qatar.) Subsidies are one of the reasons why inflation in the GCC did not spike to the same heights seen in some other major economies.

However, the UAE has liberalised fuel prices which indirectly impacted even the countries with fuel subsidies. This caused transport to be a significant contributor to inflation in 2022, but turned deflationary for most of 2023. On the other hand, rents were deflationary in 2021 and weak in 2022, but they have steadily risen in several states over the last year. As of January 2024, rents have increased to 7.8% in Saudi Arabia and 6.2% in Dubai, making them the major driver of inflation in the region. This has partially offset the deflation in transport.

Aside from food, which averaged about 2.5% across the GCC in January, other components are all registering only modest inflation under 2%. Higher interest rates in the region during 2023 may have been a disinflationary factor, dampening demand for local goods and services, combined with the impact of easing global prices on imports.

GCC inflation eases but rents remain high

Source: National sources, PwC analysis; UAE estimated from Dubai components from July 2023; composite series weighed by non-oil GDP.