The balance grows
Start with AED 10,000 and earn a hypothetical 8% over one year. The statement now shows AED 10,800. That is the nominal result: the amount of money changed, before adjusting for inflation.
So does the price of the basket
Suppose the same basket of goods rises 5%, from AED 10,000 to AED 10,500. Your AED 10,800 now buys 10,800 ÷ 10,500 = 1.028571 of that basket. You can buy about 2.86% more than at the start, even though the account balance rose 8%.
Use the exact relationship
Real return = (1 + nominal return) ÷ (1 + inflation) − 1. Here, 1.08 ÷ 1.05 − 1 is approximately 2.86%. Subtracting 5% from 8% gives a useful rough estimate of 3%; division accounts for the changed price base. A nominal return below inflation produces a negative real return.
Match the period and the costs
Compare returns and inflation over the same period. Our example excludes fees and taxes, which can reduce the return available to spend. A broad inflation measure may not match your personal purchases. The 8% and 5% are assumptions, not forecasts or current market data.
Sources & further reading
Sources checked 13 November 2026. These organisations provide reference material and do not endorse this website.
