Economy

Inflation eases to 1.6% in Saudi Arabia

April 15, 2024, 11:47 AM

Passengers board a bus in Riyadh. Saudi transport costs fell 1.8 percent year on year

Price rises lower in March
Housing costs up 8.8 percent
Subsidies help reduce food prices

Inflation in Saudi Arabia fell to 1.6 percent in March, from 1.8 percent in February, driven mainly by housing rents.

The trend of lower price rises over the past year continued.

The consumer price index hit a high of 2.8 percent year-on-year inflation in May 2023 but has been under 2 percent since September.

The March figure was a result of cost decreases of 1.8 percent for transportation costs and 1.1 percent for personal goods and services, the General Authority for Statistics said in its monthly report.

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There was an 8.8 percent increase in prices of housing, water, electricity, gas and other fuels and a 0.9 percent increase in prices of food and beverages, it said.

Increases in the Saudi government’s wholesale price index have mirrored the CPI fall over the past year, rising from a low of -1.3 in June to 3.8 percent in March.

These were provoked by a 25.2 percent rise in the price of basic chemicals and a 12 percent increase in refined petroleum products. The index hit a high of 4.3 percent in January.

Government subsidies baked into food and petrol prices tend to lower price inflation in the wholesale index, but businesses had been reluctant to pass on higher costs over the past year as the Saudi economy slowed.

Inflation has remained relatively low in Saudi Arabia compared with global levels, and effective subsidies in food and petrol limit the impact of international price increases. The impact of Red Sea shipping disruptions has so far been small.

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Oil production cuts hit the Saudi economy last year, leading to a GDP contraction of 0.8 percent in 2023.

Riyad Bank, which publishes the Saudi Purchasing Managers’ Index with S&P Global, said in its latest report that business activity rose sharply in the first quarter with growth in sales and recruitment and an easing of input cost pressures, including wages.