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Prices of UAE onions, bread up to 50% lower than those in Western countries

Here’s how the country manages to keep prices low amid high inflation in US, Europe

Published: Sat 21 Jan 2023, 7:29 AM

Updated: Sat 21 Jan 2023, 3:43 PM

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Grocery items such as bread, cheese, fruits and vegetables and soft drinks are much more economical in the UAE than in the US and European countries.

This is thanks to the government’s push to freeze prices, low fuel prices, increased local production of perishable goods and stronger dirham making imports cheaper.

Local retailers and economists say that prices of some of the goods such as fruits and vegetables are cheaper by over 50 per cent in the UAE as compared to some developed countries due to low taxes in the country.

Globally, inflation has been a challenge for governments. While the rest of the world has suffered from skyrocketing food and fuel prices, UAE has relatively seen lower levels of inflation when compared to its developed market peers.

Inflation in the UAE stood at 6.77 per cent, lower than nine per cent in the European countries and nearly at par with the US at 6.5 per cent.

Of late, the Philippines and Pakistan have seen shortages of onion, wheat and other commodities, resulting in massive increases in prices in those countries.

In the UAE, currently, almost 60 per cent of the consumer price index (CPI) basket comprises housing (utilities), transport and food costs.

Vijay Valecha, chief investment officer, Century Financial, said barring the latest increase in the rent prices, the housing and utilities costs in CPI have declined most of the time over the last 3-year period.

“Much of the credit to stable food prices can also be attributed to the UAE Cabinet decree freezing prices of essential commodities,” he said.

In November 2022, the UAE cabinet adopted a new pricing approach for essential consumer goods. These include products like cooking oil, rice, sugar, dairy, bread and wheat. Furthermore, for all the essential daily FMCG and consumer products, the suppliers who want to raise their prices due to high import costs must submit all the relevant evidence and data to the authorities.

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UAE consumers to feel the benefit of the price drop

Simon Ballard, chief economist, First Abu Dhabi Bank, said inflation is still a global challenge but less of an issue for the UAE and other Gulf countries.

Dr Dhananjay Datar, Chairman and Managing Director, Al Adil Trading, said grocery prices are likely to drop further due to a drop in freight rates and the strengthening of the dirham.

“Generally, it takes around two months for prices to filter down to the consumers. Since freight rates have dropped over the last few months, now prices are coming down and UAE consumers will soon realise the price drop. Plus, there is huge competition, hence, companies are looking to sell at lower prices. Production of commodity products has been very good and this will reflect in prices February and March 2023 prices for the UAE consumers,” he said.

Dr Datar expects residents will benefit from the drop in prices of rice, cooking oil, wheat, pulses, spices, tea, coffee and cereals in the coming months.

Prices in UAE are cheaper by 70 per cent

Vijay Valecha said daily food items like bread, local cheese, eggs and poultry products are less expensive in UAE due to local production and relatively lower distance from the production.

“The relative proximity of producing countries like India and the strong purchasing power of the dirham means vegetables and fruits are affordable in UAE. Apples, oranges, tomatoes and onions are 50-70 per cent cheaper in UAE when compared to the US. Similarly, bread is almost 55 per cent cheaper here, cheese about 20 per cent, a bottle of water about 65 per cent less and a soft drink costs just half,” he added.

The other prices that are much more affordable in the UAE are taxi fare, fuel, gold, food, rents outside the city centre areas, electronic devices, clothing and luxury goods when compared to the European Union and the US.

“Since petrol prices are 30 per cent less when compared to developed countries, a taxi trip here costs just half of that in the United States.”

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