Weak housing demand and the US dollar's strength helped inflation ease to a two-year low last year.
Inflation eases to two-year low as global food prices stage decline
Consumer inflation eased to a two-year low of 1.9 per cent in Abu Dhabi last year, helped by slack demand in the housing market.
Inflation sank 0.2 per cent last month from the previous month, according to data from the Statistics Centre - Abu Dhabi.
"The outlook for inflation is very benign," said Khatija Haque, a GCC economist at Emirates NBD.
"Global food prices have already fallen 3.7 per cent from January to November 2011.
"That will eventually feed through to headline inflation in the UAE and, combined with housing inflation easing and a strong dollar, will help to keep inflation low."
A rapid jump in food and transport prices drove up inflation to 3.06 per cent in 2010 after a brief period of deflation during the global economic downturn.
Prices for food and non-alcoholic beverages rose 7.5 per cent last year, a far gentler rise than in the previous year.
Transport price rises also slowed.
Housing, the largest contributor to the index, rose 1.5 per cent as more supply hitting the market eroded price pressures. Clothing and footwear was the only component of the index to drop, dipping 13.8 per cent last year.
The dollar's strength also played a part in keeping inflation in check.
A strong dollar helps to control the cost of importing goods into the region.
The currencies of the UAE, Saudi Arabia, Qatar, Oman and Bahrain are all pegged to the dollar for exchange-rate purposes.
The dip in inflation last month compared with the previous month was partly attributable to lower prices for housing, water, electricity, gas and other fuels.
Consumer prices rose 1.2 per cent last month from the same period in 2010.
The largest driver was an 8 per cent rise in prices at restaurants and hotels, and for alcoholic beverages and tobacco, which were up 7.4 per cent.