Inflation in GCC Region Likely to Drop in 2023 and 2024

Inflation in GCC Region Likely to Drop in 2023 and 2024

Several measures initiated by the GCC countries ensured that Inflation remained relatively low in the region in 2022 despite averaging higher than estimates in 3.3% as compared to annual estimate of 3.1%, according to the International Monetary Fund’s (IMF) Regional Economic Outlook.

However, the IMF expects GCC inflation to fall in the next two years pencilling an average of 2.9% in 2023 and 2.3% in 2024.

In the UAE, the Consumer Price index (CPI) grew by 4.6% during Q4-2022 as compared to the 2.6% increase it witnessed during Q1-2022. The smaller but persistent inflation rate of the Emirates is in line with the global inflation trend but is significantly lower than the global average.

In terms of full year, The UAE witnessed an inflation rate growth of 4.8% during 2022, 0.1% lower than UAE Central Bank’s forecast. In terms of sub-indices, the UAE Housing sub-index, the category with the biggest weight in the general index (35.1%) registered a 1.6% y-o-y rise in Q4-2022 mainly driven by increases in rents in Dubai.

The Transport index, the second largest index in the UAE’s CPI, recorded an 11% y-o-y increase during Q4-2022 while the third largest sub-index, the Food and Beverages sub-index, registered a 7.1% y-o-y growth during the similar period. According to the UAE’s Central Bank, inflation in the Emirate would decline and average at 3.2% in 2023 due to weaker price growth expected in almost all categories of the CPI, especially in the Transport and Food and Beverages sub-indices.

Moreover, the Emirate’s imported inflation is also anticipated to be low due to the general decline in worldwide inflation. Even the IMF in its latest Regional Economic Outlook report, has forecasted an inflation rate of 3.4% in 2023 for the Emirates, the highest inflation forecast among the GCC countries in 2023.


Lower inflation in GCC countries is mainly attributed to governmental intervention such as price caps on certain products, subsidies on key products or utilities and the strengthening of the US dollar to which all GCC countries have pegged to their currencies except for Kuwait which has linked the Kuwaiti Dinar to a basket of currencies including the US dollar.

In the wider Arab World, inflation is expected to accelerate this year reflecting the economic fallout from the pandemic induced economic restriction as well as the Russia-Ukraine conflict. The IMF expects inflation to reach 9.9% in 2023 for the Arab World, as compared to 8.9% in 2022. In contrast, the IMF forecasts inflation in the MENA region to reach 14.8% in 2023 underlining the fourth consecutive year in which the MENA region’s inflation has exceeded the 10% mark.

In terms of sectoral inflation trends, the Food and Beverages subcategory has been one of the most important categories in terms of weight or growth in GCC inflation performance. This subcategory has showed growth in all the GCC countries except the UAE.

The Food and Beverages CPI subcategory for Kuwait recorded a y-o-y monthly growth of 7.5% in March-2023 followed by Bahrain with Food and Beverages subcategory growth of 4.8% during the month.

Among the GCC countries, inflation growth in the Housing subcategory was mixed albeit leaning to positive y-o-y growth during March-2023. Qatar’ Housing costs rose by 8.7% y-o-y during March-2023, the highest growth among the GCC countries. On the other hand, Bahrain’s Housing prices contracted by 2.1% during the similar period.

In terms of the Communication subcategory, both Bahrain and Qatar recorded negative growth or decline in costs in their Communications inflation rate at -2.5% and -4.8% y-o-y during March-2023, respectively.

In the Education subcategory, GCC inflation growth has been on a declining trajectory. Saudi Arabia’s Education inflation growth fell from a growth of 6.3% in March-2022 to a growth of 3.1% during March-2023 supporting the Kingdom’s overall CPI decline during the period. Moreover, Kuwait’s Education CPI subcategory growth has also dropped from 19% in March-2022 to just 0.5% in March-2023.

The combination of persistent high oil and gas prices and the interest rates hikes by GCC central banks largely in unison with the US Federal Reserve rate increases has been another key pillar which kept GCC inflation rate significantly lower than their global counterparts.

Global Business Magazine

Global Business Magazine

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