Saudi Arabia's annual inflation softens further to 1.6% in October

Consumer price index in the kingdom has been declining steadily since January

Saudi Arabia's economy was among the fastest-growing global economies last year. Reuters

Annual inflation in Saudi Arabia fell to 1.6 per cent in October, down slightly from 1.7 per cent in September and 2 per cent in August, as the price of household items and clothing dropped.

The main driver of inflation in October was residential rents, which rose 9.3 per cent, reflecting the 14.9 per cent increase in rents for apartments, Saudi Arabia’s General Authority for Statistics (Gastat) said in a report on Thursday.

“Rents were the main driver of the inflation rate in October 2023 due to their high relative importance in the Saudi consumer basket, with a weight of 21 per cent,” Gastat said in its monthly update.

“Food and beverage prices increased by 0.8 per cent … while restaurants and hotels prices increased by 1.9 per cent, due to the increase in catering services prices.”

In contrast, furnishings, household equipment and maintenance prices dropped by 3.1 per cent, driven down by a 4.2 per cent slide in furnishing and carpet prices.

Clothing and footwear prices also declined by 3.7 per cent as prices of garments dropped by 5.7 per cent, according to Gastat data.

Inflation in Saudi Arabia, the Arab world's largest economy, has been declining steadily since January, starting at a rate of 3.4 per cent.

The kingdom has undertaken structural and fiscal reforms and managed to keep inflation in check, the International Monetary Fund said in September.

Inflation has soared globally on rising food and commodity prices after Russia's invasion of Ukraine in February last year.

Worldwide, inflation is forecast to decline from 8.7 per cent in 2022 to 6.9 per cent in 2023 and 5.8 per cent in 2024, the IMF said in October. But the forecasts for 2023 and 2024 are revised up by 0.1 percentage points and 0.6 percentage points, respectively.

Saudi Arabia, which was the fastest-growing major economy in the world last year, is forecast to grow by 0.8 per cent in 2023, a downward revision from 1.9 per cent projection in July, following 8.7 per cent growth in 2022, the Washington-based lender said.

Saudi Arabia’s economy contracted by 4.5 per cent annually in the third quarter due to oil production cuts by the Opec group's largest producer.

Oil-related activity during the three-month period to the end of September declined by 17.3 per cent, according to flash estimates released by Gastat in October.

Non-oil and government activity increased in the third quarter by 3.6 per cent and 1.9 per cent, respectively, on an annual basis, Gastat said at the time.