Food prices, rents seen pushing Saudi inflation below 3%

Lower growth in food prices and property rents is seen pushing Saudi Arabia’s inflation rate below 3 percent in the final quarter of this year.

The country’s central bank today said that it expects rises in the cost of living to ease, although analysts forecast the annual inflation rate will be higher in 2013 compared to last year.

“It is expected that the general inflation in the kingdom will continue going down to below 3 percent during the fourth quarter of 2013, especially with the decrease of inflationary pressures in the food and beverages group and the continuation in the decrease in the prices of main commodities on the global markets,” the central bank said, according to Reuters.

John Sfakianakis, chief investment strategist at Saudi investment firm MASIC, said the lower inflation was primarily due to food and rental prices.

“Food inflation is falling… Food and beverages as an item has been declining over the past five months,” he told Al Arabiya News.

“The other issue is that rental inflation is also in decline,” he added.

A crackdown on illegal expatriate workers in Saudi Arabia could have had an impact on property rents, Sfakianakis said.

Hundreds of thousands of workers left Saudi Arabia during an amnesty on illegal workers in the kingdom, which ended on Nov. 3. A further 150,000 illegal workers have left the Kingdom since the end of the amnesty, media reported in early December.

Saudi consumer price growth stood at 4.0 percent in April but has eased since then. Inflation stood at 3.1 percent in November and 3.0 percent in October.

Analysts polled by Reuters in September forecast average inflation of 3.8 percent this year, up from 2.9 percent in 2012.

Sfakianakis said that, despite the expected drop in inflation in the final quarter, the rate for 2013 as a whole could be higher than last year.

He forecast that the inflation rate in 2014 would be “in the same range, if not a little higher” than 2013.