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Saudi April Inflation Hits 10.5 Pct on Rents, Food - ASHARQ AL-AWSAT English Archive
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RIYADH, (Reuters) – Annual inflation in the world’s top oil exporter Saudi Arabia rose to 10.5 percent in April, its highest level in at least 27 years, fuelled mainly by rents and food prices.

Inflation is a challenge across the Gulf Arab region, where governments which peg their currencies to the ailing dollar are raising wages and subsidies, bringing in price controls and tightening lending curbs to dampen the impact of price rises.

In Saudi Arabia, the cost of living index rose to 115.2 points in April from 104.3 points a year earlier, Economy and Planning Ministry’s satistics unit said on Saturday.

The index however clocked its weakest monthly rise this year, adding 0.9 percent from March. Annual inflation, as measured by the index, was 9.6 percent in March.

“Inflation is not on an abating pattern despite a decline in money supply growth. It has more to do with rents and food than with money supply,” said John Sfakianakis, chief economist at SABB bank 1060.SE, HSBC’s affiliate in Saudi Arabia.

Money supply growth, however, eased to 23.04 percent in March from 26.2 percent in February.

The indicator has been accelerating and reached an at least 14-year high in February, a trend that has prompted the central bank to raise bank reserve requirements three times since November to 12 percent from 7 percent.

April rents soared 20.4 percent from a year ago, while food and beverages costs added 16 percent, according to the data.

“Rents inflationary pressures are continuing to rise. It is an issue that has to be addressed in terms of both supply and demand for housing and commercial space and of the real estate speculation,” Sfakianakis added.

Subsidies targeted to help lower income Saudis, state employee cost-of-living allowances and lower import levies on various food items are among measures Saudi Arabia has introduced to tackle inflation this year.

“Food subsidies have not kicked in yet. The global rise in food prices had a major impact on Saudi prices. The prices of staples have risen 40 percent this year,” Sfakianakis said.

Food prices account for about 26 percent of the cost of living index while rents account for 18 percent of the index.

Price rises are plaguing the world’s biggest oil-exporting region, where economies are surging on a near sevenfold increase in oil prices during the last six years.

Finance Minister Ibrahim al-Assaf said this month that the kingdom was having some success with efforts to curb public sending but acceleration in rents and food costs continue to pose risks.

Sfakianakis said government spending now needs to be more selective and prioritised.

Dollar pegs force the Gulf Arab states, bar Kuwait, to track the United States in cutting interest rates. With the dollar tumbling this year to record lows against the euro and a basket of major currencies, some imports have become more expensive.

The combination of rising prices and falling purchasing power has already triggered riots by migrant labourers in the United Arab Emirates and Bahrain.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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