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United Arab Emirates Food and Drink Report Q2 2008Published by: Business Monitor International Published: May. 12, 2008 - 59 Pages Table of Contents
AbstractInflation continues to be a major concern in the UAE economy, and the food and drink sector inparticular, as discussed in BMI’s recently published UAE Food & Drink Report for Q208. With all of the Gulf oil-producing States looking to offset inflation by introducing price controls on rents, raising wagesand increasing food subsidies, the UAE government has been considering giving its citizens discounts onbasic food products. Under the proposed scheme, UAE nationals will be able to purchase rice, bread, tea, sugar, milk, butter and other basic food items at cost, by presenting an identification card. Whileeconomies worldwide have had to deal with major food price inflation, the Gulf region has been hitparticularly hard due to its major negative food and drink trade balance, and the local currency's peg tothe dollar, which has been plummeting against a wide range of currencies, particularly the euro, makingimports far more expensive.In February the government of the emirate of Dubai announced its plans to establish a chain ofsupermarkets, giving few details, apart from saying that the name of the new chain will be Aswaaq andthat it will raise a part of the capital for this new project by selling shares in an initial public offering inwhich it will sell the equivalent of 55% of the new company. As many of the country's flashy Westernstyle MGR outlets focus on the higher end of the market, with a noticeable lack of discount stores, thereare not many established chains that would be interested in carrying very low-end products, for fear ofdamaging their image and looking 'cheap'. Therefore the government’s decision to establish these storesmay be a means of catering to this lower end of the market at a time when food prices inflation isexpected to continue. Then, the government made an even bigger move, with the Ministry of Economysending out a maximum price list for a number of basic goods, saying that it will fine retailers AED100, 000 (US$2, 724) for selling above these prices. Following this announcement the Union Co-Operative Society agreed to fix the retail price of 16 basic goods at their 2007 levels in its stores, and hasrecommended that other retailers follow suit. The nuisance of high inflation will continue to hang over the UAE economy in 2008. Although we doforecast a slight easing in inflationary pressure in 2008 to an average of 7.9% year-on-year (y-o-y), downfrom 9.7% y-o-y in 2007, this is still elevated by historic standards and inflationary expectations remainhigh. Inflation is also becoming a major political issue, with the falling real value of wages, particularlyamong unskilled workers, fuelling discontent, with migrant workers having staged riots last November in Dubai. Inflation is also discouraging highly skilled workers from relocating to the UAE, therebyimpacting the business environment, highlighting what a serious concern this is for the country. Get Full Details About This Report >> |
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