Economy From chicken to weddings, Saudi prices continue to soar By Shane McGinley August 18, 2022 Creative Commons Imported frozen chicken is up 38% and local potatoes are up over 50% Food and drink driving kingdom’s consumer inflationReliance on imports a key factor but local produce also up Businesses are passing costs on From meat and vegetables to the cost of events such as weddings, consumer prices in Saudi Arabia continue to rise, as inflation reached 2.7 percent year-on-year in July. The biggest increase was in the food and beverage segment, which rose 3.9 percent, mainly on the back of meat prices increasing 5.1 percent, the General Authority for Statistics (GSTAT) said in its monthly report. “Food and beverages prices were the main driver of the inflation rate in July 2022, due to their high relative importance in the Saudi consumer basket (with a weight of 18.8 percent),” the report said. IMF urges Saudi to explore new taxes to boost non-oil revenues Restaurateurs beware: diners may choke on your price rises “An unstable global geopolitical environment, supply chain disruptions, and resulting raw material and food supply shortages have raised consumer prices globally,” UAE-based Rabia Yasmeen, senior consultant at research firm Euromonitor International, told AGBI. “With continued pressure on major global currencies, countries have also begun to increase gold reserves – resulting in an overall reduction in greenback reserves. While the Saudi Riyal is pegged to the USD, the currency would see the impact of these shifts.” Prices surge for imports Data from the Saudi Food and Drug Administration shows that the kingdom imports 80 percent of its food from 157 countries, so it is particularly susceptible to global fluctuations. The Food and Agriculture Organisation of the United Nations reported that prices are 13.1 percent above what they were in July 2021. GSTAT’s figures showed that several imported items have seen double digit increases, with imported chilled sheep meat up 15.25 percent, imported frozen chicken is up 38 percent, imported olive oil up 9.91 percent, imported tomatoes rising 15.36 percent, and imported barley animal feed soaring 37 percent. “Imported product categories see a greater impact of these changes and many of the locally grown items are able to offer stable prices,” Euromonitor’s Yasmeen said. However, not all local items have escaped the price surges, including some local cheeses rising 26 percent, watermelon prices increasing 16.73 percent, and medium local potatoes costing 53.85 percent more compared to July 2021. Wedding costs in the kingdom rose by 36 percent Other areas that have also been impacted, according to the GSTAT data, with furnished apartments 14.54 percent more expensive, and inflation seeing parties and wedding costs rising by 35.8 percent. The latest S&P Global Saudi Purchasing Managers’ Index, issued earlier this month, found that costs for businesses in the non-oil sector continued to face a rapid increase in input costs in July. While the rate of inflation edged lower last month, this was still the second fastest since August 2020, mainly due to rising oil and material prices, and staffing costs rising at their fastest pace since February 2018. As a result, most businesses are passing the extras costs on to customers, meaning prices are likely to keep rising. “Output prices rose solidly, which could impact market demand going forward as global inflationary pressures also persist,” said David Owen, economist at S&P Global Market Intelligence. However, Jason Tuvey, senior emerging markets economist at London-based Capital Economics, told Reuters he believed inflation was reaching its peak in the kingdom. “Looking ahead, we think that headline inflation is now probably at or very close to a peak. Food inflation should continue to drop back and the government’s cap on local fuel prices will help to contain energy inflation,” he said. The inflation figures come as the International Monetary Fund (IMF) on Wednesday said it would keep its forecast for Saudi economic growth at 7.6 percent for 2022, one of the fastest in the world, boosted by strong oil demand. This is in line with the kingdom’s government forecast for 7.4 percent growth this year.