JEDDAH: Consumers have noticed that prices in Saudi Arabia have been rising since Ramadan. The reasons behind the rise in prices are, “inflation and greedy traders coupled with a lack of control by the concerned government agencies responsible for balancing the prices,” Saudi Consumer Protection Association’s President Mohammed Al-Hamad told Arab News recently.
According to the quarterly inflation report released last month by the Saudi Arabian Monetary Agency (SAMA), the cost of living had risen to 4.9 percent in the third quarter of this year compared to the third quarter of 2008.
The report stated that the three major cities of Jeddah, Riyadh and Dammam had registered higher rates, led by Jeddah with a 6 percent rise, Dammam at 5 percent and Riyadh at 4.9 percent. SAMA attributed an influx of holiday visitors for the rises in the urban centers of the Kingdom.
On the bright side, SAMA also stated in its report yearly inflation had decreased from 9.9 percent during the fourth quarter of last year to 4.2 percent.
“The inflation rate in specifically food and beverages is expected to decline due to decreased prices of commodities on the global market,” the report said.
The reason for the steep drop, according to John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group, is the stabilization of commodity prices from an “unprecedented price rally” last year. “The causes of the 2007-2008 spike in price was due to low levels of world cereal stocks, crop failures in major exporting countries, rapidly growing demand for agricultural commodities for bio-fuels and rising oil prices,” he said.
However, he pointed out that the reasons for the rising prices today are not the same. He told Arab News the cause of the current rise in prices has to do with, “macro-economic factors, oil prices and low interest rates” which is causing investors to put their money in commodities.
Sfakianakis also said a weakening dollar (the Saudi riyal is pegged to the US currency) coupled with the growing appetite by speculators and index funds for commodities is causing prices to rise in the Kingdom.While world cereal stocks are at more comfortable level than they were last year, the demand for bio-fuels is still a leading driver, though it is slowing. The demand to convert grains into bio-fuel has an adverse effect on commodity prices.
However, SAMA says that inflation should stabilize in the next quarter. “All of these factors are expected to have little effect on the prices of commodity imports to the Kingdom and, accordingly, the cost of many production inputs in domestic industrial entities is expected to be stable bolstering projections of stability in prices over the next period,” the SAMA report stated.
For his part, Al-Hamad said he believes the main reasons behind the recent increases in domestically produced food and beverage items are due to, “global price increases, dollar depreciations and fluctuations, greedy local traders, the lack of adoption of corporate social responsibility, irrational commitment by consumers to specific kinds of brand in the food market coupled with lack of awareness of social control.”
Al-Hamad vowed that the CPA has a significant role to play within its statute. “One of our objectives is to protect consumers against exaggerated prices through promoting consumer awareness rationalized consumption, and provide them with necessary information and advice,” he said.
