|20 February, 2020

Saudi Arabia's cost of living goes up in January  

More price increases expected this year, says one economy expert

A Muslim pilgrim holds a plastic camera at a shop in the holy city of Mecca ahead of the annual haj pilgrimage, September 20, 2015. Photo for illustrative purposes.

A Muslim pilgrim holds a plastic camera at a shop in the holy city of Mecca ahead of the annual haj pilgrimage, September 20, 2015. Photo for illustrative purposes.

REUTERS/Ahmad Masood

The cost of living in Saudi Arabia went up in January as declines in housing rents as well as utilities costs have started to ease.

 The kingdom’s consumer price index (CPI) for January 2020 recorded a 0.4 percent increase compared to the same period last year, data from the General Authority for Statistics showed.

 The kingdom also witnessed the second consecutive month of positive inflation after being in negative territory for most of 2019.

 The biggest increases were noted in the restaurants and hotels category, food and drinks, healthcare and education.

 “The main driver of the rise in the headline rate was an easing of deflation in the housing and utilities category, which accounts for around 25 percent of the CPI basket,” said Jason Turvey, senior emerging markets economist at Capital Economics.

 He said this appears to reflect the recent bottoming out in the Saudi property market, which is feeding through into rents declining at a slower pace.

 He also noted that this was the second consecutive month that inflation in Saudi Arabia has been positive, adding that further increases are expected this year.

 “While we expect a fresh slowdown in the non-oil sector to keep a lid on underlying price pressures, further hikes to local fuel prices are likely to push up the headline inflation rate over the course of this year,” Turvey said.

 

Inflation outlook

As Saudi Arabia is expected to tighten its fiscal policy in 2020, Turvey said the non-oil sector could “lose some steam.”

 “This will keep a lid on underlying price pressures. But the state oil company, Aramco, announced a fresh rise in fuel prices this month. And if the disruption caused by the coronavirus subsides, we expect a rebound in oil prices to prompt further hikes to fuel prices – which will now be revised on a monthly, rather than quarterly, basis – pushing up headline inflation,” said Turvey.

 (Writing by Cleofe Maceda; editing by Seban Scaria)

 Cleofe.Maceda@refinitiv.com

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020

More From Economy