(MENAFN- Khaleej Times) Inflation in Abu Dhabi reached 4.6 per cent year-on-year in February, as housing, water, electricity, gas charges rose significantly.
The Consumer Price Index (CPI) for the month rose to 132.1 points from 126.3 points in February 2014.
The 4.6 per cent rise in consumer prices caused an increase of 6.2 per cent in consumer prices for households in the bottom and middle quantile, says Statistics Centre Abu Dhabi.
However, after rising to five per cent in January 2015, the CPI dropped 0.2 per cent in February 2015. The biggest impact on inflation came from rise in housing and utility charges, showing a massive impact of 89.2 per cent year-on-year in February.
Abu Dhabi, which has introduced economic reforms, is withdrawing subsidies in a phased manner. At the start of January, it introduced a new water and electricity tariff, under which subsidies to UAE nationals on water have been withdrawn. They will pay 10 per cent more on electricity consumption.
Expatriates will pay 40 per cent more on electricity usage on an average and 170 per cent more on water consumption.
The International Monetary Fund has estimated that subsidies and transfers account for nearly 20 per cent of Abu Dhabi's budget.
However, reducing subsidies will likely add to inflationary pressure in the emirate in 2015, says a research note issued by Abu Dhabi Commercial Bank (ADCB).
"We see Abu Dhabi's move to reduce the subsidy spending as highly positive for fiscal sustainability and in reducing wasteful consumption. Reflecting this, the ratio of government spending to GDP is expected to moderate in our outlook period," says Dr Monica Malik, chief economist at ADCB, in a note.
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