RIYADH, 17 August 2007 — Inflation in Saudi Arabia is likely to increase to 2.8 percent in 2007, from 2.2 percent the previous year, Al-Rajhi Bank & Investment Corp. said in a report this week. “In 2007, consumer and investment demand, especially in the construction sector, is likely to continue putting upwards pressure on prices,” the Gulf’s largest lender by market value said in its July monthly report.
“Furthermore, bottlenecks in the labor market contributed significantly to the upward pressures on prices as the costs of labor and materials have increased,” it added.
Saudi inflation rose to a five-month high of 3.1 percent in June as food and housing costs climbed, official data showed.
Analysts say a declining dollar has also played a role, although the government has ruled out a revaluation of its dollar-pegged currency.
US bank Citigroup said in a research report this month that Saudi inflation would average about 2.7 percent in 2007. It said investment in infrastructure was driving up construction costs and that rising prices could force to cut prices on some commodities.
Inflation rose to a five-month high of 3.1 percent in June as food and housing costs climbed, official data showed.
The cost of living index rose to 104.4 points in June, up 0.2 percent compared with May, the Central Department of Statistics said, without giving a comparative figure for June 2006.
The index was at 101.3 points in June 2006, according to data posted on the Website of the Saudi Arabian Monetary Agency (SAMA), or central bank.
The department said the rise in June in inflation stemmed mainly from food products and rent prices. Inflation has been gaining this year as windfall oil revenues boosted Saudi Arabia’s economy, increasing demand for housing.
The annual inflation rate dropped for the first time in nine months in March, when it slipped to 2.86 percent, from 3 percent in February.
Inflation should reach 3 per cent in 2007 after expected spikes during September, when the Islamic fasting month of Ramadan begins, and December, when the annual Islamic pilgrimage to Mecca happens, Zahid said.
Central bank governor Hamad Saud Al-Sayyari has linked inflation to factors such as higher cost of imports property prices.
The riyal currency’s peg to the US dollar had little impact on prices, he said last month.
Separately, Saudi Arabia’s bourse regulator said on Tuesday its has licensed six local firms to offer services to securities investors.
The firms include investment companies, consultancies and a brokerage firm, the Capital Market Authority (CMA) said in a statement on the bourse Web site.
CMA said in late 2006 that it had licensed a first batch of 14 independent brokerage firms.
Traditionally banks have dominated brokerage activities in the Kingdom.
In June, the Capital Market Authority fined two traders from the Kingdom’s largest brokerage and two investors a total 410,000 riyals ($109,300) for violating trading regulations.
Saudi inflation rises to 3.1 per cent in June
Riyadh:
Inflation in Saudi Arabia rose to a five-month high of 3.1 per cent in June as food and housing costs climbed, official data showed.
The cost of living index rose to 104.4 points in June, up 0.2 percent compared with May, the Central Department of Statistics said, without giving a comparative figure for June 2006.
The index was at 101.3 points in June 2006, according to data posted on the Web site of the Saudi Arabian Monetary Agency (SAMA), or central bank.
The department said the rise in June in inflation stemmed mainly from food products and rent prices.
Inflation has been gaining this year as windfall oil revenues boosted Saudi Arabia’s economy, increasing demand for housing.
“It’s the pre-holiday month so demand does not decline much,” said Khan Zahid, chief economist at Riyad Bank.
Inflation could drop in July and August as Saudis travel outside of the kingdom for annual vacations, Zahid added.
Inflation reached 3.6 per cent in January, SAMA data show. The central bank had revised consumer price index data for that month to 104.4 points from an initial 103.8 points.
The annual inflation rate dropped for the first time in nine months in March, when it slipped to 2.86 per cent, from 3 per cent in February.
Inflation should reach 3 per cent in 2007 after expected spikes during September, when the Islamic fasting month of Ramadan begins, and December, when the annual Islamic pilgrimage to Mecca happens, Zahid said.
Central bank governor Hamad Saud Al-Sayyari has linked inflation to factors such as higher cost of imports property prices.
The riyal currency’s peg to the US dollar had little impact on prices, he said last month.