Food in the Emirates contributes the least to inflation in the Gulf

A study issued by the Central Bank yesterday showed that food constitutes only about 12% of the consumer price index basket in the UAE, which is one of the lowest percentages among the Gulf Cooperation Council countries, compared to about 35% for the housing sector, which represents the largest component of the basket, which limits the impact of rising food prices on the general inflation rate, compared to other Gulf countries that give food a greater weight in the consumer basket.

The study, which was titled: “Do unusual climate shocks lead to inflationary effects?” concluded. Evidence from the Gulf Cooperation Council countries indicates that the UAE and Gulf economies are still exposed to the repercussions of climate change, but the transmission of these effects to inflation varies from one sector to another, while food remains the most affected as a result of supply chain disruptions and high costs of transportation, storage, and refrigeration.

The study relied on analyzing monthly data, covering the period from January 2010 to October 2025 in the six Gulf Cooperation Council countries, by developing an index to measure unusual climate shocks, based on deviations in temperature, rain, and wind speed, with the aim of measuring the impact of these phenomena on consumer prices.

The results showed that climate shocks do not lead to an immediate rise in general inflation, but their effects begin to appear gradually after several months, with their impact peaking seven to nine months after the “shock” occurs, reflecting the transmission of the increase in costs through production, transportation, and distribution, all the way to the final consumer.

On the other hand, food prices were the most responsive to these shocks, as they recorded clear and sustainable increases in the medium term, while their impact on “housing” remained limited due to the nature of annual rental contracts, and the regulation or support of the prices of many services related to housing in the Gulf countries. The study also showed that clothing prices begin to record a clear statistical impact about 12 months after the occurrence of the climate shock, while the impacts on transportation and hospitality remained less clear from a statistical standpoint.

The study confirmed that the Gulf countries’ reliance on importing a large proportion of their food needs makes them more vulnerable to the effects of climate phenomena experienced by food-exporting countries. However, local climatic conditions are also capable of raising the costs of storage, refrigeration, and internal transportation, which is reflected in food prices. It also explained that inflationary effects become more apparent when climate events are severe or frequent, while economies can absorb moderate shocks without major repercussions on prices.

The Central Bank concluded that the results of the study confirm the importance of integrating climate risks into assessments of inflation and monetary policy, in addition to continuing to invest in the flexibility of supply chains, diversifying sources of food imports, and strengthening the food security system, in a way that limits the transmission of the effects of climate changes to consumer prices, and maintains price stability in the medium and long term.