Saudi inflation jumps to highest in 30 years

Annual inflation in Saudi Arabia accelerated to 11.1 per cent in July, its highest level in at least 30 years, due mainly to increases in food and housing costs, official data showed yesterday.

The cost of living index for the largest Arab economy hit 117.3 points on July 31 compared with 105.6 points a year earlier, the Central Department of Statistics said in a statement.

Food and beverage costs advanced 16 per cent in July compared to an increase of 15.8 per cent in June while the rental index – which includes rents, fuel and water – soared 19.8 per cent versus 18.7 per cent in June. The rent index alone rose 23.7 per cent.

Inflation is a key challenge across the Gulf, where currencies are pegged to the ailing United States dollar, as their economies surge on windfall revenues from oil that has been racing to record highs.

Analysts expect annual inflation to hit its peak towards the end of the third quarter which coincides with the end of Ramadan, the Muslim fasting month which sees a surge in both consumption and prices.

Saudi Arabia is the world's largest oil exporter and the region's most populous nation.

Monthly inflation in Saudi Arabia added 1.6 per cent in July compared to June, when it reached an annual 10.6 per cent. It hit 10.4 per cent in May and 10.5 per cent in April. In June, it added 0.5 per cent month on month, after dropping 0.2 per cent in May and adding 0.9 per cent month on month in April.

The country has dismissed changing its foreign exchange regime and has instead raised public sector wages, sought to control growth of money supply while mainly boosting subsidies for food and public services and largely curbing public spending.

Dollar pegs force the Gulf countries, excluding Kuw-ait, to track the US in cutting interest rates. With the greenback tumbling this year to record lows against the euro and a basket of major currencies, some imports have become more expensive.

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