20/05/2009
Saudi Arabia’s annual inflation rate fell for the sixth consecutive month to a 19-month low of 5.21 percent in April, with official data showing food price rises continued to decline while pressures from rents remained steep. Inflation rates have declined rapidly in the largest Gulf Arab economy as commodity prices slumped and a stronger US dollar helped reduce import costs for the Kingdom, which pegs its riyal to the dollar.
Saudi Arabia’s Central Department of Statistics said on its website that the cost of living index stood at 121.2 points in April 30 compared to 115.2 points last year. And the inflation rate of 6 percent in March was the lowest inflation rate since September 2007.
John Sfakianakis, chief economist at SABB (the Saudi British Bank), said, “Inflation is falling due to the lower cost of food products which are now being passed onto the consumer. A slightly stronger dollar along with global deflation is helping Saudi Arabia keep inflation down. There is still a lag effect for foodstuffs which should help inflation come down even further. However, rents will keep inflation at around 5 percent on an average on annual basis which are at historically high levels. Deflation in Saudi Arabia, as well as for many other Middle Eastern countries, is a far cry and will not be witnessed.”
Monica Malik, regional economist at EFG-Hermes in Dubai said,“We are forecasting that inflation will average 4.8 percent this year as food prices fall further. However, rents will stay high as there is a shortage of housing domestically."
Saudi Arabia said last year it would invest around $400 billion in the next five years, mainly to enhance infrastructure in the country of around 26 million people.
