Food, Grocery Prices Could Decrease 20% in UAE; Why

Due to a decline in freight costs and a strengthening of the Emirati dirham versus the rupee and pound, food and other products imported from India, Pakistan, Europe, and the United Kingdom will be much less expensive, hence contributing to a decline in UAE inflation.

As a consequence of these two causes, retailers anticipate that the price of food and other consumable products will fall by at least 20 percent in the near future.

“Due to a lack of containers, freight costs had skyrocketed to $1,100; therefore, the prices of most groceries and other commodities had increased dramatically. As a result of the availability of containers, the price per 20-foot container has decreased to $375 and is likely to drop to $100-$150. Dr. Dhananjay Datar, chairman and managing director of Al Adil Trading, said that this would assist reduce the cost of food imports and other consumer items in the UAE.

Moody’s Investors Service said that container freight costs have decreased by 57% from their peak in September of last year, however they are still almost three times higher than in December of 2019. “Softening freight prices will assist in reducing inflationary pressure on the supply side,” it says.

During the pandemic, freight costs began to rise as a consequence of a severe spike in demand from China, which led to a container scarcity. However, the increasing supply of containers and reduced demand for containers from China are causing the global price of containers to decrease.

In addition, the Indian, Pakistani, European, and British currencies have significantly depreciated against the UAE dirham, making goods from these nations cheaper.

On Monday, the UAE dirham rose versus the Indian rupee and the British pound to reach an all-time high. The Indian rupee reached a record low of 22.21 versus the UAE dirham, while the British pound plunged to 3.85.

On Monday, the Pakistani rupee was trading close to an all-time low of 65.

“Since India and Pakistan are important suppliers of food imports for the UAE, these two variables — cheaper freight costs and lower currencies — will contribute to a decrease in inflation in the UAE. Both nations are significant suppliers of rice, spices, dried fruits, vegetables, and a variety of other food products that are eaten daily by the locals. Dr. Datar predicts that the costs of food and other consumer items will decrease by at least 20% as a result of these two reasons.