JEDDAH, 21 April 2004 — The cost of living index in Saudi Arabia has dropped marginally over the last four years. There has been a drop of 1.5 percentage points since 1999, according to the Saudi Arabian Monetary Agency (SAMA).
Data on the Kingdom’s cost of living index published in SAMA’s monthly statistical bulletin shows that the general index fell from 100 in the base year 1999 to 98.3 in February 2004. It dropped to 98.9 in 2000 and then to 97.8 in 2001; it rose to 98 in 2002 and to 98.6 in 2003 and then dropped to 98.5 in January 2004.
Percentage points also dropped slightly in the following areas: fabrics and apparel 9.7 percent, furnishings 4.9 percent, transport and communications 5.5 percent and entertainment and education 1.8 percent. Percentage points remained the same for housing; there was a slight increase - 1.3 percent - for medical care and an increase of 2.4 percent for food.
Inflation is expected to drop slightly this year. “Inflation is expected to reach 0.2 percent — the lowest in the Gulf — compared with 0.8 percent last year,” Al-Eqtisadiah said in a report from Al-Rajhi Company for Banking and Investment. The company said that a rise in the cost of living in 2003 caused a slight rise in inflation. Among Gulf countries, the UAE is first with three percent inflation, followed by Kuwait 1.6 percent, Bahrain and Qatar 1 percent, and Oman 0.9 percent.
Samba’s first quarter 2004 update on the Kingdom’s economy, however, forecasts inflation to be “modestly higher” at 1.5 percent this year. This is due to depreciation in the value of the dollar in 2003 and also the riyal, according to Brad Bourland, chief economist at Samba Financial Group. “This depreciation is making euro- and yen-denominated imports to Saudi Arabia more expensive.” Other than adding perhaps one percentage point to the level of inflation, the impact of the decline in the dollar’s value is negligible on the Saudi economy.