Saudi inflation remains positive in December

Saudi Arabia’s inflation rate rose in December for the second month in a row, reversing 10 months of negative performance, data from General Authority for Statistics (GAS) showed.

The cost of living index rose by 0.4 percent and 0.1 percent in December and November, respectively, following 10 months in the negative territory, due to declining oil prices that left the economy in a limbo.

"Saudi inflation remained subdued at the end of last year but the recent introduction of a new value-added tax and a raft of administered price hikes will push inflation up sharply," London-based Capital Economics (CE) said on Tuesday.

The agency said it expects inflation to rise to around 6.5 percent year-on-year over the next few months. For the year as a whole, CE expects inflation to average 6.2 percent -- above consensus estimates of 3.4 percent and the government forecast of 5.7 percent.

The following table shows monthly inflation rates since January 2017.

For the most main groups of goods on the consumer prices index (CPI), tobacco surged the most by 100 percent.

Meanwhile, Apparel & Footwear declined steeply by 3.1 percent.

Saudi Arabia’s inflation rate is set to return to normal levels, propelled by the rise in energy prices and introduction of value-added tax (VAT) as of January 2018, Dr. Ahmed Alkholifey, Governor of Saudi Arabian Monetary Authority (SAMA), announced recently.

* The evident increase reflects the introduction of a selective tax on tobacco products.