Saudi consumers brace for quickening pickup in inflation

Saudi consumers are expected to be hit in the pocket as prices rise. (Reuters)
Updated 25 December 2017
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Saudi consumers brace for quickening pickup in inflation

LONDON: Saudi consumers are set to benefit from a raft of incoming economic reforms next year — but it may come with a cost as inflation quickens.
Inflation in the Kingdom is expected to pick up dramatically in 2018 to more than 5 percent, as the implementation of VAT and energy price reforms are enacted, according to a note from Jadwa Investment bank in Riyadh.
The note said inflation would be driven by the introduction of VAT, a hike in electricity tariffs, and soon-to-be introduced tariffs aimed at residential, commercial, agricultural, health care, private education, and charitable institutions.
Jadwa said: “Although we expect inflation to rise to 5.2 percent in 2018, this may be adjusted once the remainder of energy price reform is disclosed in the first quarter of the year.” Inflation is currently at minus 0.1 percent, said the bank.
Still, Jadwa expects an improvement in the economy in the year ahead, supported by the oil and non-oil sector. Oil sector GDP was expected to exhibit some modest improvements. That is because production would rise when OPEC and non-OPEC countries gradually exit from previously agreed production cuts.
Growth in the non-oil sector is also forecast to improve as the expansionary budget, with a specific set of stimulus packages, lifts activity, said the bank.
It added that downside risks for the economy were linked to rises in electricity tariffs, as well as the introduction of VAT. But taking these into account, Jadwa sees government expenditure for 2018 as being sufficient to continue supporting positive growth in the non-oil sector.
In addition, the targeted stimulus package focusing on SMEs, housing, construction and export growth, among others, “will particularly be growth-enhancing to the private sector.”
The expansionary budget should act as a cushion to the economy from the potentially disruptive effects of forthcoming measures such as rises in dependency fees, expat levies and energy price reforms, added Jadwa.
“The budget statement states that the Saudi economy will grow by 2.7 percent in 2018, with non-oil GDP growth at 3.7 percent. This would imply a growth of 1.4 percent from the oil sector. We see the main bulk of oil sector growth likely coming from the addition of the Jizan refinery, which is expected to come on-line during the year, rather than any major rise in crude oil production.”
Another bank, Al-Rajhi Capital, saw a number of factors helping to drive private sector non-oil GDP growth in the next few years.
First, increased consumer spending in the economy as more Saudis take up formal employment, and secondly, better efficiency of government spending after various rationalizations over the last two years, as well as the government’s ability to maintain its expansionary stance going forward as it has leeway to increase borrowing up to 30 percent of GDP (as stated in the budget).
Another positive, said Al-Rajhi, was the likely liquidation of assets worth $100 billion that would generate additional revenue to bankroll ongoing government expenditure, while retaining fiscal discipline.


Saudi Arabia calls for global action on hate speech

Updated 4 min 53 sec ago
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Saudi Arabia calls for global action on hate speech

  • Saudi Ambassador to the UN made the call following the “cowardly” slaughter of 50 Muslim worshippers in New Zealand
  • March 15 to be declared international day for combating Islamophobia: ISESCO

JEDDAH: Saudi Arabia has called for urgent action from the international community to tackle hate speech and promote tolerance in the wake of the deadly terrorist attack on two mosques in New Zealand.

In an address to the Human Rights Council in Geneva, the Kingdom’s ambassador to the UN, Dr. Abdul Aziz Al-Wasel, said last Friday’s “cowardly” slaughter of 50 Muslim worshippers in Christchurch went against all religious and coexistence values.

Al-Wasel told council members that the incident was part of a series of racist and ethnic events nourished by a culture of hatred, racism, violence, terrorism, extremism and Islamophobia, the Saudi Press Agency reported.

“We must unite and stand together to fight the hatred and extremism that causes the killing of innocents,” Al-Wasel said.

He pointed out that in some countries hate speech was tolerated on political and media platforms in the context of representing freedom of opinion and expression. But he said such speeches fueled racist tendencies toward religious minorities and migrants, while also propagating extremism and increasing tensions against Muslims, immigrants and other minority groups.

On behalf of the Kingdom, the envoy urged all states to clamp down on extremist voices and enact laws and policies calling for tolerance and acceptance within the framework of the UN’s Durban Declaration and Program of Action.

Meanwhile, Dr. Abdul Aziz bin Osman Al-Tuwaijiri, director general of the Islamic, Educational, Scientific and Cultural Organization (ISESCO), has called on the international community to proclaim March 15 an international day for combating Islamophobia.

He warned against the growth of extremism and hate speech despite efforts over the past three decades in the field of dialogue among cultures.

“Saudi Arabia has consistently declared its rejection of terrorism in all its forms,” Al-Tuwaijiri told Arab News. 

He added that King Salman inaugurated the Riyadh-based Global Center for Combating Extremist Ideology (GCCEI), which aims to promote moderation and counter the spread of extremism.

“Saudi Arabia has provided substantial financial support to the UN to strengthen its efforts in fight against terrorism,” he said.

He said that Islamophobia has become an international phenomenon with international spinoffs and harmful repercussions for the rights, security and safety of Muslim citizens in countries outside the Islamic world.

Al-Tuwaijiri added that governments and regional and international organizations are invited to intensify their efforts to fight this phenomenon that jeopardizes international peace and security, and said that it runs against the principles of the UN Charter, the Universal Declaration of Human Rights and other international declarations, agreements and conventions, especially Article 20 of the International Covenant on Civil and Political Rights (ICCPR).

He called for efforts to be intensified to fight the trend and to promote a culture of dialogue, understanding, harmony, peaceful coexistence and alliance among the followers of different religions and cultures.

Al-Tuwaijiri further called on the international community to fight the phenomenon because it not only targets Muslims and Islam, but also the human values that preach mutual respect and coexistence.