Consumer prices in Saudi Arabia increased by 2.7 per cent on an annual basis in July, as an increase in global food prices, made worse by the Russia-Ukraine conflict, added to inflationary pressures.
The Consumer Price Index in July was also higher than the 2.3 per cent rate of inflation recorded in June, Saudi Arabia’s General Authority for Statistics said in the latest CPI data released on Monday.
Overall food and beverage prices increased 3.9 per cent and “were the main driver of the inflation rate in July due to their high relative importance in the Saudi consumer basket, with a weight of 18.8 per cent", the Gastat report said.
Transport prices rose by 3.6 per cent, driven primarily by a 4.2 per cent increase in the prices of cars in the kingdom.
The cost of personal goods and services increased by 2.1 per cent on an annual basis, while restaurant and hotel prices jumped 6.3 per cent.
While the cost of education rose 5.7 per cent, housing, water, electricity, gas and other fuel prices increased by a more modest 2 per cent, according to government data.
Inflation globally has risen sharply during a steep increase in the prices of food and other commodities since the Ukraine conflict began in February.
For 2022, global inflation is forecast at 5.7 per cent in advanced economies and 8.7 per cent in emerging market and developing economies, according to the International Monetary Fund.
However, inflation in the GCC has been significantly lower than in most advanced and emerging market countries amid improved economic activity, driven by higher oil and gas prices, Kuwait-based Kamco Invest said this month.
In July, the kingdom allocated 20 billion riyals ($5.33bn) to dampen the effects of increasing prices on its citizens. Half of the money will go to social insurance beneficiaries and people registered with the Citizen Account Programme, the Saudi Press Agency reported at the time, citing a royal decree issued by King Salman.
Saudi Arabia is distributing 10.4bn riyals as direct cash transfers to support social security beneficiaries, and the rest of the money will be used to increase strategic stocks of basic commodities and ensure their supply.
The kingdom, which imported about 45 per cent of its wheat from Russia and Ukraine last year, has capped prices of many essential items to soften the effects of inflation.
With continued supply chain disruption, international food and feed prices could rise by up to 22 per cent, the UN's Food and Agriculture Organisation said in February.
The effects of rising food and energy prices is much more pronounced elsewhere in the world. In the US, the consumer price index has touched a 40-year high, amid rising fears of a global recession. In Europe, it climbed to 8.9 per cent in July.
Despite rising cost pressures, Saudi Arabia’s economy grew by 11.8 per cent in the second quarter of 2022, with oil-related economic activity in the kingdom rising 23.1 per cent annually.
Non-oil economic activity climbed 5.4 per cent during the period, according to flash estimates by Gastat in July.
Saudi Arabia, the Arab world’s largest economy, is forecast to grow 7.6 per cent after expanding 3.2 per cent last year, according to the IMF.
Meanwhile, Jadwa Investment expects the kingdom's economy to expand 7.7 per cent in 2022.
