Higher food prices have driven the overall inflation in Kuwait to hit a three-year high, while housing costs have remained flat, the National Bank of Kuwait (NBK) said on Tuesday.
The cost of consumer goods and services rose in the fourth quarter of 2020 to 3 percent, the highest in more than three years. For the full year, the inflation stood at 2.1 percent, almost double the previous year’s 1.1 percent.
“The pick-up in inflation was largely due to the food component of the consumer price index,” NBK said in a note released on Tuesday.
Food prices in Kuwait rose by 4.9 percent from 1.1 percent in 2019. The increases were across the board, with meat, fruit and vegetables witnessing significant price pressures.
According to NBK, the rising cost of food may have been driven by the COVID-19-induced disruptions in the supply chain, among other factors.
“[It] could be a result of a combination of higher international food prices, partially linked to a fall in the US dollar, prolonged supply chain issues and price rises by local retailers as they pass on higher purchase prices,” NBK said.
“Domestic demand was buoyant in part of 2020, both in terms of being pent-up, following weeks of lockdown in the second quarter of last year, and sustained, with international travel restrictions forcing more people to spend in the country rather than overseas for most of the year,” it added.
While food prices have gone up, housing costs remained flat in Kuwait. NBK, however, noted that the index value for housing costs has been unchanged at 115 since June 2019 and may have not reflected the overall slowdown in the property market.
“It is difficult to draw firm conclusions from this component… [The index did not change] during the height of the pandemic, when rents were under pressure due to expat departures and/ or due to tenant’s demands for lower rents amid lower income,” NBK said.
“There is, of course, the possibility that these dynamics will feed through into the [consumer price index] survey at a later stage.”
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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