RIYADH, 21 February 2008 — Consumer prices in the Saudi capital, Riyadh, and four other cities topped 6 percent in the fourth quarter, growing faster than the average of 16 cities, as food, rent and utility costs surged, official data showed.
Saudi Arabia’s dollar peg means its ability to fight inflation — which hit a record 6.5 percent in December — is limited because it has to mirror US interest rates at a time when the United States is lowering them to ward off recession.
Inflation in the central city of Hail, which has a population of about 270,000, grew the fastest in the country of 25 million people, up 8.1 percent during the three months to Dec. 31, the Saudi Arabian Monetary Agency (SAMA) said on its website. The average for the 16 cities was 5.9 percent, SAMA said yesterday.
Inflation in Riyadh, the Kingdom’s biggest city with a population of about 4.3 million, accelerated to 7.3 percent compared with 5.9 percent in the three months to Sept. 30, the data showed. “The change in the prices of imported goods is an important factor affecting the level of domestic inflation,” the central bank said.
Inflation last year averaged 4.1 percent, a 12-year high. Average inflation in the prior five years was just 0.8 percent. Saudi Arabia, the world’s largest oil exporter, pegs its currency to the dollar, which declined almost 11 percent last year against the euro.
Food and beverage price rises in the desert Kingdom accelerated to 8.1 percent during the fourth quarter, compared with 6.5 percent in the third, SAMA said.
The Kingdom last year imported almost 25 percent of its goods from Europe and 8.4 percent from Japan, the data showed. Another 13.4 percent came from the United States.
Fourth-quarter rent and utility costs rose 12.1 percent, compared with 9.5 percent in the previous three months, it said. Prices in Taif, a western city to which the government moves in the summer from Riyadh, rose 7.4 percent, and in Najran — where the population has surged more than five-fold to about 250,000 since 1974 — it climbed 6.5 percent. In central Buraidah inflation was 6.8 percent.