Inflation rises across the region

Inflation is creeping up in Jordan, Egypt and Saudi Arabia as signs of price pressures emerge across developing markets.

Factors blamed for stoking prices in the region vary. In Jordan, subsidy cuts havehelped to send inflation to its highest level since January 2009, while the sliding Egyptian pound has contributed to advancing prices in the Arab world's most populous country.

In Saudi Arabia, a record government spending programme has fanned inflationary pressure.

"For oil-importing countries it is a concern as it can lead to balance of payment pressures and budget pressures," said Khatija Haque, the senior economist at Emirates NBD.

In Jordan, consumer price inflation reached 7.8 per cent last month from the year earlier, official data released on Wednesday showed.

The rise came despite four interest-rate rises since January 2011, signalling government monetary policy has had only limited success in an environment of rising food prices and subsidy cuts.

Jordanians have enjoyed cheap fuel and food for years. But under a US$2 billion (Dh7.34bn) IMF loan deal, the government began withdrawing such support last year.

"The higher inflation comes in spite of a weak overall growth picture, but could become more painful still if the government meets pledges to the IMF to cut subsidies further," Simon Williams and Liz Martins, regional economists for HSBC, warned this week.

"With aid and [foreign investment] flows remaining elusive, the government has little choice but to comply with the conditions as it seeks to finance widening budget and current account deficits."

In Egypt, headline inflation rose 8.3 per cent last month from the year earlier. It was up 2.5 per cent from January.

Sharp rises in food, tobacco, clothing and footwear, furniture and equipment this year reflect the higher cost of imported goods from a weaker currency.

The pound has dropped more than 8 per cent since the end of last year as concerns linger about the country's future.

But the outlook may not ease any time soon. If Egypt follows the same path as Jordan in cutting subsidies as part of a possible $4.8bn IMF loan, inflation may worsen, economists say.

In the GCC, Saudi Arabia has the fastest inflation rate. The measure in the Arab world's biggest economy was 3.9 per cent in January, up from 3 per cent in September. It follows King Abdullah pledging in the first quarter of 2011 to spend $130bn on extra subsidies for housing and benefits.

In the UAE, inflation has so far remained more tamed. Dubai's consumer price index edged up 0.2 per cent last month on an annual basis, the first yearly increase in the emirate's consumer prices since December 2011, data showed on Wednesday. Prices were unchanged compared with the previous month.

Inflation has also begun to rear its head in other markets. The China central bank governor Zhou Xiaochuan warned on Wednesday that the country must be on "high alert" against inflation.

His comments followed inflation rising to a 10-month high of 3.2 per cent.

Data from India showed yesterday the country's wholesale price index rose to 6.8 per cent last month from a year earlier, up from 6.6 per cent.