Saudi inflation to ease in 2013

Inflation in Saudi Arabia is expected to ease in 2013 because of a projected fall in housing and food inflation but the rate remains high compared with that in nearby Gulf oil producers, according to a key Saudi investment firm.

The rate stood at around 4.5 per cent in 2012 and is forecast to slip to nearly 4.3 per cent in 2013, one of its lowest levels in eight years, the Riyadh-based Jadwa Investments said in a study sent to Emirates 24/7.

It showed inflation will decline in almost all components of the consumer price index, mainly in housing, which will fall back to 7.1 per cent in 2013 from 8.1 per cent in 2012. Food and beverage inflation is also expected to recede to about 4.2 per cent from 4.4 per cent while education and entertainment will fall to 2.9 per cent from 3.1 per cent.

But inflation in transport and telecommunications is projected to rise to around two per cent from 1.8 per cent in the same period.

The report showed inflation in medical care will remain as low as 0.2 per cent in 2013 compared with 0.1 per cent in 2012 while “other expenses and services” will drop to plunge to nearly 2.2 per cent from 3.7 per cent.

In a previous report, Jadwa said Saudi Arabia, the largest Arab economy and the world’s top oil exporter, is reeling under the highest inflation rate in the Gulf despite a sharp decline in the rate over the past years.

Saudi Arabia suffered from 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 4.4 per cent in 2012.

Housing inflation was also as high as 17.5 per cent before diving to around 8.1 per cent in 2012.

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