Consumer price index inflation is expected to increase over the next year in Saudi Arabia, after turning negative in recent months, the International Monetary Fund said in its recent country report.
The fund cites the additional reforms to energy prices, the recent introduction of excise taxes and the upcoming implementation of VAT as reasons for expecting the rise in inflation. The kingdom in January reported deflation in consumer prices for the first time in over a decade, according to a Reuters report, as the economy continued to suffer as a result of low oil prices and the drop in government revenues.
In June this year, Saudi Arabia saw a decrease in the price of consumer goods for the sixth month in a row, according to the General Authority for Statistics.
The fund noted the strong momentum of reform in Saudi Arabia, but it highlighted the risk of uncertainty of how these measures will impact the economy.
Authorities indicated considering slowing the pace of fiscal adjustment given the weakness of the economy, the IMF said. Last month, Reuters reported that the Kingdom had moved back into recession as a result of the extended low oil price and austerity measures introduced in a bid to curb the country's budget deficit. Saudi Arabia recorded a budget deficit of $79 billion in 2016.
“Effective prioritisation, sequencing, and coordination of the reforms is essential, and they need to be well-communicated and equitable to gain social buy-in and ensure their success.” the report said.
The government had earlier this year launched a program named “The Citizen Account” to help low-to-middle income Saudis cope with tough austerity measures. It pledged to provide financial assistance to ease the impact of the reforms and allocated 25 billion riyals ($6.66 billion) of its 2017 budget for the programme.
Further reading:
© ZAWYA 2017
The fund cites the additional reforms to energy prices, the recent introduction of excise taxes and the upcoming implementation of VAT as reasons for expecting the rise in inflation. The kingdom in January reported deflation in consumer prices for the first time in over a decade, according to a Reuters report, as the economy continued to suffer as a result of low oil prices and the drop in government revenues.
In June this year, Saudi Arabia saw a decrease in the price of consumer goods for the sixth month in a row, according to the General Authority for Statistics.
The fund noted the strong momentum of reform in Saudi Arabia, but it highlighted the risk of uncertainty of how these measures will impact the economy.
Authorities indicated considering slowing the pace of fiscal adjustment given the weakness of the economy, the IMF said. Last month, Reuters reported that the Kingdom had moved back into recession as a result of the extended low oil price and austerity measures introduced in a bid to curb the country's budget deficit. Saudi Arabia recorded a budget deficit of $79 billion in 2016.
“Effective prioritisation, sequencing, and coordination of the reforms is essential, and they need to be well-communicated and equitable to gain social buy-in and ensure their success.” the report said.
The government had earlier this year launched a program named “The Citizen Account” to help low-to-middle income Saudis cope with tough austerity measures. It pledged to provide financial assistance to ease the impact of the reforms and allocated 25 billion riyals ($6.66 billion) of its 2017 budget for the programme.
Further reading:
- Saudi Arabia has a firm grip on the economic reform handle
- Saudi Arabia boosts economic reforms
- Saudi tax authority approves VAT Implementing Regulations
- Sales of energy, soft drinks slump in Saudi after tax boost
© ZAWYA 2017
