Saudi inflation seen up in 2012

Inflation in Saudi Arabia is expected to rise to a four-year high in 2012 and high rents remain the key factor driving the general price index up. From around five per cent in 2011, inflation in the world’s oil basin is expected to climb to 5.4 per cent in 2012 as no let up is seen in rent inflation and the Gulf Kingdom’s economy remains buoyant. According to the Riyadh-based Jadwa Investment, inflation this year will be the highest since 2008, when it climbed to a record 9.9 per cent because of the weakening US dollar, an upsurge in global prices and strong domestic demand. In 2009, the rate dipped to 5.1 per cent following the global fiscal crisis before rising again to 5.3 per cent in 2010. Despite the decline, inflation in Saudi Arabia, the largest Arab economy, remained relatively high compared with neighbouring UAE and other Gulf oil producers, where the rate has plunged below two per cent in some members. The report showed rents will be the main driver of inflation this year, with their level project4ed at 9.1 per cent compared to 7.7 per cent in 2011. Food and beverage prices are projected to ease to 4.4 per cent from 5.2 per cent in 2011 after climbing to a record 14.1 per cent in 2008. Clothes and footwear are also expected to be costlier this year, rising by 2.7 per cent compared to 0.4 per cent in 2011. Home furniture inflation is forecast to rise to 3.1 per cent from 0.5 per cent and education to 3.5 from 1.6 per cent. Other services could drop to 7.6 from nine per cent. On monthly basis, the report showed inflation fell to 5.3 per cent in April from 5.4 per cent in March mainly because of lower food price inflation.