IMF overly pessimistic on oil price forecast, says Saudi minister

Saudi Arabia's Finance Minister Ibrahim Al Assaf yesterday dismissed the likelihood of a contraction in the economy of the world's largest oil exporter saying these predictions were based on the IMF's oil price forecast.

He said the International Monetary Fund (IMF) was overly pessimistic on its forecast of oil price this year. Speaking to Al Arabiya TV, Assaf said: "There was some exaggerated pessimism."

On Saturday, Saudi Oil Minister Ali Al Naimi said oil prices would "eventually" hit $75 per barrel but cited weak demand as a problem.

In another report, the Kingdom's central bank said yesterday inflation in Saudi Arabia, which fell to a 19-month low of 5.2 per cent in April, is expected to decline throughout the second quarter of this year.

"There is a general trend that indicates a continuing decline in the rate of inflation in the Saudi economy in the second quarter of 2009," the Saudi Arabian Monetary Agency (Sama) said in a report posted on its website.

Inflation rates have declined rapidly in the largest Gulf economy as commodity prices slumped and a stronger US dollar helped reduce import costs for the Kingdom, which pegs its riyal to the dollar. Inflation in March was six per cent while it peaked at 11.1 per cent in July.

Sama said housing prices are expected to decline in the second quarter after they showed greater resistance than other components of the cost-of-living index to recent declines.

"There is a decline in the construction input prices, such as steel and cement. Investment over the past three years... by the private sector will alleviate price pressure in housing," Sama said.

Food prices are also set to decline further, said Sama.

It cited that IMF data showed the fund's food price index with a 24.6 per cent decrease in March compared to a year earlier.

Rental price rises eased to 18.8 per cent in April compared with 20 per cent in March, while food and beverage costs recorded a rise of 1.6 per cent in April compared with a 2.8 per cent advance in March, according to the Kingdom's statistics body.

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