Consumer prices in Saudi Arabia up by three percent on higher food, transport costs

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Saudi Arabia’s consumer price index (CPI) rose three percent in August from a year earlier, official data showed on Thursday, accelerating from a 2.7 percent increase in July.

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Food and beverages and transport prices were again the main drivers of inflation, both rising four percent in August, the General Authority for Statistics said in a statement. Meat prices were up 6.7 percent, pushing up the rate for food and beverages, which make up 18.8 percent of the consumer basket.

Prices were up 0.4 percent on a monthly basis, compared with a 0.5 percent month-on-month rise in July.

“The monthly CPI was affected by the increase of food and beverage prices by 0.8 percent, mainly due to the increase in food prices by 0.9 percent,” the statistics agency said.

Capital Economics expects inflation to have peaked in August and slow to two percent by the end of this year and 1.5 percent by mid-2023, said James Swanston, Middle East and North Africa economist.

“If anything, the risks are skewed to the downside given the growing likelihood of a cut to the VAT rate.”

In July 2020, Saudi Arabia tripled its value-added tax (VAT) to 15 percent to shore up finances hit by low oil prices due to a price war with Russia and the impact of the COVID-19 pandemic.

Last year, Saudi Arabia’s Crown Prince Mohammed bin Salman said the decision to raise VAT was “a painful measure” that would last between one and five years before a cut to between five percent and 10 percent.

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