Monday, Aug 15, 2011

DUBAI (Zawya Dow Jones)--Saudi Arabia's annual rate of inflation accelerated to 4.9% in July from 4.7% in June, a sign that the recent surge in global food prices and a hefty citizen-support package could become an inflation headache for the kingdom, data from the Central Department of Statistics and Information showed late Monday.

Rent, fuel and housing related services saw a 7.5% rise in July from a year earlier, compared with a 7.1% jump in June. Meanwhile, food and beverage prices gained 5.8% on year versus a 5.5% rise in the previous month, the CDSI said on its website. Meanwhile, the cost-of-living index in the kingdom, the Arab world's largest economy, stood at 135.8 points last month, up from 134.2 in June.

On the month, consumer prices rose 1.2% in July.

Saudi Arabia, a mostly desert country with scarce water supplies, imports the bulk of its food needs.

Muhammad al-Jasser, the governor of the Saudi Arabian Monetary Agency, the country's central bank, has repeatedly said that inflationary pressures, caused mainly by an increase in global food prices, are worrying, but the central bank sees no need to change interest-rate policy.

Economists expect inflation in the world's top oil exporter to remain higher than its historic average of 1% as the government continues to post expansionary budgets.

New spending programs announced recently by King Abdullah, which are likely to cost the government at least 485 billion Saudi riyals ($129.28 billion) over several years, could lead to inflationary pressure in the kingdom, the country's finance minister, Ibrahim Al Assaf, said in April.

SAMA said in May that the kingdom may continue to see moderate inflationary pressures in the second quarter of this year, mainly due to lower food prices. However, in the medium to long term, the kingdom is likely to see slower inflation rates as King Abdullah's recent decision to build 500,000 homes and to raise the ceiling on loans from the Mortgage Development Fund will put less pressure on the rent index, SAMA added.

-By Summer Said, Dow Jones Newswires; +966-546-842373; summer.said@dowjones.com

(END) Dow Jones Newswires

15-08-11 2123GMT