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What’s to fear with VAT inflation on the rise?

According to new statistics from the Statistics Center Abu Dhabi and the Department of Economic Development (DED); Inflation in consumer prices in Abu Dhabi rose 5% in January, compared to the same month in 2016.

Who is affected?

Craig Plumb, JLL’s Head of Research in MENA, said: “impact on the residential real estate will be minimal”.

Stating, that “Hotel and Retail Sectors will be affected the most by this”.

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In its analysis; DED credited the increase to a variety of factors, in addition, to the implementation of value-added tax (VAT).

The retail sectors are the ones seeing the most increase in VAT.

The prices of tobacco and soft drinks increased 100% due to the implementation of excise (selective) tax in October 2017.

The transportation sector contributed 39% to the total increase rate in January, with prices going up by 13 %, while the “miscellaneous goods and services” sector contributed 18% of the total, with prices going up 12%.

The “food and drinks” sector was found to have contributed 18% of the total increase rate achieved in January 2018, with prices in the sector going up 7%.

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Not all is bad.

The DED notes that the rate of inflation in the “residence, water, electricity, gas and other fuel types” sector has decreased by 20% which they say is a reflection to the 3% decrease in residential rental rates.

The report also noted that consumer prices for national families increased by 5% in January, while consumer prices for non-national families went up 4%.

This, in Craig Plumb’s opinion, isn’t a huge increase stating: “It’s a negative, but not a big negative,  5% rate is relatively low compared to international standards.”