RIYADH: Dubai’s inflation witnessed a slight decrease in March, dropping to 3.34 percent compared to 3.36 percent in February, according to official data.

The decline in inflation is attributed to lower prices of specific goods and services, notably in the food and transportation sectors.

Dubai’s Consumer Price Index rose to 110.77 points in March, compared to 110.50 points in the previous month, due to the rise in prices of key expenditure groups and services, including insurance and financial services by 8.67 percent, housing, water, electricity, gas, and fuel by 6.34 percent, and education by 3.62 percent.

However, despite the overall decrease in annual inflation, some sectors experienced price hikes. These areas included transportation, which witnessed a 1.75 percent increase, and housing, water, electricity, gas, and fuel, which saw a 0.58 percent increase.

Speaking to Arab News, economist and policy adviser Mahmoud Khairy highlighted that inflation affects sectors differently based on various factors such as economic structure and market dynamics.

“The most prominent and immediate effect of inflation is on consumption, potentially reducing consumers’ purchasing power and altering spending patterns,” he said.

Khairy also emphasized the sensitivity of the housing and real estate markets to inflationary changes in the Gulf Cooperation Council region. 

“Construction costs and property values may increase which will put extra burden on financing needs,” he added.

In addition to the decrease in inflation, food and beverage prices in Dubai in March decreased by 0.36 percent, along with drops in furniture prices by 0.06 percent and information and communication by 0.02 percent. 

The cost of restaurants and hotels also decreased by 2.15 percent, while prices of insurance and financial services lowered by only 0.08 percent.

In neighboring Saudi Arabia, inflation also fell in March, registering a rate of 1.6 percent compared to 1.8 percent the previous month. 

Shifts in the food and beverage sector primarily drove the decline.

Khairy explained that inflation expectations influence consumer behavior, similar to preparing for a weather forecast.

“When people expect prices to rise, they often rush to buy things sooner to avoid paying more later,” he said.

Investors closely monitor inflation, tweaking portfolios based on their predictions. Similarly, policymakers and central banks rely on inflation expectations to steer the economy, akin to checking weather forecasts for planning. 

Earlier last week, IMF chief Kristalina Georgieva remarked on the importance of central bankers meticulously adjusting their interest rate reduction strategies in response to incoming data. 

Regarding challenges and opportunities for GCC economies, Khairy noted the reliance on oil revenues, currency pegs to the US dollar, and geopolitical tensions in the Middle East as factors influencing inflation and economic stability.

“Disruptions to global supply chains due to geopolitical tensions or trade disputes can lead to supply shortages and price increases, contributing to inflationary pressures,” he said.

The World Bank said in a report that “GCC countries are small open economies with high dependence on international trade which makes them vulnerable to global shocks in addition to domestic ones.” 

Khairy also emphasized the importance of economic diversification efforts and strategic infrastructure investments to mitigate the impact of external shocks on inflation and promote overall financial stability in the region.

He concluded that higher inflation poses challenges for government budgets and financing.

“As prices increase, governments face a higher fiscal deficit to achieve just the same level of consumption and investment. On the other hand, inflation is always associated with higher interest rates which increases the cost of financing for government debt,” he said.

RIYADH: Egypt’s foreign debt increased by $3.5 billion in the fourth quarter of 2023, reaching a total of $168 billion, as reported by the nation’s planning ministry.  

This marks a climb from the $164.5 billion recorded at the end of September, representing 42.4 percent of the nation’s gross domestic product. Notably, 81 percent of this debt is categorized as long-term. 

This uptick in foreign borrowing is part of a broader trend over the last decade, during which Egypt has significantly increased its external debt, investing heavily in state-driven projects.  

This financial strategy was underscored last month by an $8 billion economic support package secured from the International Monetary Fund. 

Amid these monetary maneuvers, Egypt’s Finance Minister Mohamed Maait recently projected that the country’s GDP would grow by 2.8 percent in the fiscal year ending in June 2024, with expectations of an acceleration to 4.2 percent in the following year.  

These figures are closely aligned with the IMF’s more conservative forecast of 3 percent GDP growth for the calendar year 2024, indicating optimism about Egypt’s economic trajectory despite its growing debt burden. 

Earlier in April, Maait highlighted that despite the harsh impacts of global and regional economic crises, Egypt has seen financial indicators surpass budget estimates and targets over the past nine months of the fiscal year 2023-2024.  

The minister noted that this success reflects the international recognition of the North African country’s economy for achieving better-than-expected performance metrics.   

Further emphasizing the economic strategies, Maait pointed out the significant improvements in non-tax revenues, which increased by 122.9 percent, and tax revenues, which surpassed 1 trillion Egyptian pounds ($20.6 billion), marking a growth of 41.2 percent annually.    

He noted these gains were achieved without imposing new burdens on citizens or investors, thanks to expanded mechanization intended to broaden the tax base and integrate the informal economy into the formal sector.    

Maait pointed out that the country’s ongoing effort to boost its economy is evident in the Ministry of Finance’s dialogues with over 2,000 investment institutions annually.    

The ministry’s Investor Relations Unit plays a crucial role in these engagements, maintaining open dialogue throughout the year and issuing monthly performance data.  

These documents provide foreign investors with precise, up-to-date economic data, including details about debt levels, deficits, and primary surpluses, the state-owned newspaper reported.   

They also offer a simplified guide on the various incentives, including tax advantages available to investors, aiming to alleviate any concerns and accurately address potential economic risks.   

Meanwhile, data released earlier this month by Egypt’s Central Agency for Public Mobilization and Statistics showed a slowdown in the country’s urban consumer price inflation rate to 33.1 percent in March from 36 percent in February.   

Additionally, month-on-month prices rose by 10 percent in the third month of 2024, down from an 11.4 percent increase in the previous period.  

This development follows the central bank’s announcement in early March of a 600 basis points hike in interest rates at an unscheduled meeting, along with a shift to an inflation-targeting regime, allowing the exchange rate to be determined by market forces.