As per EFG Hermes, an investment bank, this year shall see Qatar and UAE experiencing deflation because of plunge in housing prices.

The report specified that the greatest reversal in inflation trends would be witnessed by the UAE and Qatar - from the highest regional inflation rates in 2007 and 2008 to deflation in 2009, all because of a fall in housing prices.

The report continued that the economic realities on the ground were diametrically opposite during the times when the UAE and Qatar witnessed inflation and when they witnessed deflation. As per the report, Qatar shall keep witnessing solid non-oil economic activity, while UAE will witness a structural correction.

EFG Hermes said: “In Qatar, the fall in the rental prices is mostly due to a marked increase in housing supply entering the market in 2009. In the UAE, it will be a result of both the correction in the property sector along with the increased supply in housing.”

In the month of June, a fall by 0.79% was seen in Qatar’s inflation, prominently on easing of rents and lower prices of food items, along with garments; and it was down 2.6% since January this year.

The latest data from the economy ministry says that a rise 0.39% has come about in the UAE’s July inflation mainly on price hike in household appliances and food items.