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29 March 2024

Saudi has highest inflation in GCC

Published
By Staff

Inflation in Saudi Arabia remained the highest in Gulf oil producers at around five per cent in 2011 and is expected to remain high in 2013 despite slowing rent rates, a key investment firm in the Gulf Kingdom said on Monday.

In October 2012, the weighted average inflation rate in the six-nation Gulf Cooperation Council (GCC) stood at as low as 2.6 per cent year-on-year mainly because of ongoing housing market correction in some members and large base-effects in others, the Riyadh-based Jadwa Investments said in its monthly inflation report.

“Inflation in Saudi Arabia remains the highest in the GCC…according to the Central Department for Statistics and Information, Saudi Arabia’s inflation rate for November slightly increased to 3.9 percent year-on-year from 3.8 percent in the previous month.”

While food prices rose slight to 4.8 percent year-on-year, rent and housing-related services maintained their gradual downward trend to reach 6.5 percent, compared with 6.7 percent in the previous month.

“Our measure of core inflation trended up to 2.2 percent in November compared with 1.8 percent in October.”

The report showed rent and housing-related services inflation fell to its lowest level in five years, though it remains the main source of inflation, adding 1.5 percentage point (ppt) to the overall inflation.

The main source of price increase in this group is the rental inflation which registered 7.2 percent year-on-year in November, it said.

“While we maintain our view that rental inflation is likely to remain one of the main sources of inflation in the Kingdom, we expect that the growing activity in the local construction sector and introduction of new rental regulations would maintain the gradual downward path for such prices.”

Jadwa projected inflation in Saudi Arabia, the largest Arab economy, at around 4.5 per cent, slightly lower than in 2011 and 2010, when the rate stood at 5.2 and 5.4 per cent respectively. Saudi Arabia reeled under its highest annual inflation rate of 9.9 per cent in 2008 because of a surge in food prices and rents, strong domestic demand and a weakening in the US dollar, to which the riyal is pegged.

Jadwa’s report, citing government estimates, showed food inflation hit a record 14.1 per cent in 2008 before dipping to 5.2 per cent in 2011.

It projected the rate at 4.4 per cent in 2012. Housing inflation was also as high as 17.5 per cent before climbing down to around 7.8 per cent in 2011. The report expected the rate at eight per cent in 2012.