Although the UAE government has yet to publish official figures for the inflation rate during the year, the figure for 2006 was put at 9.5 per cent, and in 2005 it was 4 per cent.

Investment bank Merrill Lynch has previously estimated that the rate in 2007 was 12 per cent.

The report blames rising inflation on the increase in fuel costs in the country, which has led to “higher construction costs, slashed the profit margins of the contractors and prompted house owners to raise rents sharply.”

This raises the prospect that the UAE could overtake Qatar to be the most inflationary country in the Gulf. Qatar's Finance Minister Yousef Hussein Kamal estimates Qatari inflation to be about 13.7 per cent (MEED 18:5:08).