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Inflation in Saudi Arabia to hit seven-year low: analysts - ASHARQ AL-AWSAT English Archive
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This undated file photo shows a Saudi money changer counting Saudi riyals in Riyadh, Saudi Arabia. (Reuters)

This undated file photo shows a Saudi money changer counting Saudi riyals in Riyadh, Saudi Arabia. (Reuters)

Jeddah, Asharq Al-Awsat—Inflation in Saudi Arabia is set to reach its lowest levels since April 2007, when official figures from the Kingdom’s Central Department of Statistics and Information are released towards the end of the month, according to sources speaking to Asharq Al-Awsat.

Economic analyst Abdulaziz Al-Fahad said the country’s inflation rate for December will fall below the 2.5 percent recorded the previous month, which was the lowest since September 2012.

Citing current data, he added that he expected the inflation rate to also continue to fall during the first quarter of 2015, amid a further decline in oil prices.

The country’s central bank, the Saudi Arabian Monetary Agency (SAMA), predicted an average inflation rate of below 3 percent at that start of 2014. Inflation reached its highest point this year in January, when it hit 2.9 percent.

Figures from SAMA show the average rate for 2013 stood at 3.5 percent, with the highest rate standing at the 4 percent recorded in April of that year.

Economic analyst Ghassan Badkook told Asharq Al-Awsat two main factors—low oil prices and the strength of the US dollar compared to the currencies of some of the Kingdom’s main trading partners—had both contributed to the decline in inflation.

Reduced income from petroleum sales had caused a drop in domestic demand, he said, and the decline in prices of the Kingdom’s imports from its main trading partners—especially the Eurozone, India and China—had contributed to lower consumer prices for imported products in the country.

Other countries whose incomes rely heavily on petroleum exports would also experience similar declines in inflation, he said, amid some of the lowest oil prices in recent years, which currently stand at almost half of highs recorded during 2013.

Meanwhile, Moqbil Al-Thakir, a professor of economics at the King Abdulaziz University in Jeddah, told Asharq Al-Awsat that Saudi Arabia had succeeded in keeping inflation under control during the last seven years through strict control of the country’s money supply.

He warned, however, that reduced liquidity levels in the country could have other, negative consequences if accompanied by reduced growth and increased unemployment, a prospect he said was possible in Saudi Arabia if oil prices continued to fall.