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Saudi Arabia’s inflation up to 1.8% and ‘likely’ to keep rising

Person, Shopping, Adult A Saudi woman shops for Ramadan decorations to mark the beginning of the Holy Month of Ramadan in a local market in Riyadh, Saudi Arabia, March 22, 2023. REUTERS/Ahmed Yosri Reuters/Ahmed Yosri
A woman shops for Ramadan decorations in Riyadh. Inflation rose by more than expected in February ahead of the fasting month
  • Annual inflation 1.8% in February
  • Housing market driving increase
  • Predicted to rise to 2%

Saudi Arabia’s annual inflation rate rose more than expected in February to 1.8 percent, driven by the housing market, as the country emerges from last year’s economic slowdown. 

“Actual rents for housing increased by 10 percent in February 2024, reflecting the increase in rents for villas by 9.1 percent,” the General Authority for Statistics said.

“Prices for rents were the main driver of the inflation rate in February 2024 due to their high relative importance in the Saudi consumer basket.”  

This was a jump from 1.6 percent in January and 1.5 percent in December, reflecting rising demand and greater confidence among non-oil companies to pass on higher input costs to the consumer. 

In an analysis of the latest figures, Capital Economics said they predicted the headline rate will rise further. 

“It is likely that the headline rate will edge higher over the coming months to above 2 percent year on year but this would remain low relative to other emerging markets and the kingdom’s own recent history. And, further out, we expect inflation to fall back and stabilise around 1-1.5 percent year on year,” it said. 

The government release showed prices of food and beverages rose 1.3 percent from last February, ahead of the fasting month of Ramadan, which began on March 11. 

Transport prices fell 0.9 percent due to a decrease in car sales, while clothing and footwear prices fell 4 percent. 

Inflation has remained relatively low in Saudi Arabia compared to global levels, with effective subsidies in food and petrol limiting the impact of international price increases.

The impact of Red Sea shipping disruptions has so far been small.

The statistics authority this month revised its real GDP figure for 2023 to a contraction of 0.8 percent, from a contraction of 0.9 percent given in January.

Oil production cuts hit the Saudi economy last year, while analysts are predicting a slide in crude prices this year.

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