UAE: Prices of food, groceries to drop by 20%; here's why

Prices of food items and other goods being imported from India, Pakistan, Europe and the UK will see a significant drop due to a fall in freight rates and strengthening of the Emirati dirham against the rupee and pound, hence, helping the inflation to come down in the UAE.

Retailers estimate that the cost of food items and other consumable goods will see a drop of at least 20 per cent in the near future as a result of these two factors.

“Due to shortage of containers, freight rates had shot up to $1,100 therefore prices of foods and other goods had gone up substantially for most of the items. But now the rate has come down to $375 per 20ft container and it is expected to go down to $100-$150, thanks to the availability of containers. This will help lower food import costs and other consumer goods in the UAE,” said Dr Dhananjay Datar, chairman and managing director, Al Adil Trading.

He said freight rates are consistently declining due to the supply of containers. “Freight rates were at around $400-$450 last week which have come down to around $375.”

Moody’s Investors Service said container freight rates are down by 57 per cent from their peak in September last year, although they remain about three times as high as in December 2019. “Softening freight rates will help cool supply-side inflation pressure,” it said.

The freight rates had started to jump during the pandemic due to a substantial increase in demand from China, resulting in a shortage of containers. But the new supply of containers and ease of demand for containers from China are resulting in the prices of containers going down worldwide.

In addition, Indian, Pakistani, European and British currencies have also weakened substantially against the UAE dirham, therefore, making imports cheaper from these countries.

On Monday, the UAE dirham strengthened further to hit an all-time high against the Indian rupee and the British pound. The Indian currency touched a record low of 22.21 while the UK pound fell to 3.85 against the Emirati dirham.

The Pakistani rupee was also trading close to an all-time low of 65 on Monday.

“Since India and Pakistan are major sources of food imports for the UAE, these two factors – low freight rates and weaker currencies – will help bring down inflation in the UAE. Both countries are major sources of rice, spices, dry fruits, vegetables and a number of other food items that are consumed daily by the residents here. With these two factors coming into play, prices of foods and other consumer goods are likely to drop at least 20 per cent,” said Dr Datar.

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