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Kuwait inflation at 5.4% highest in Gulf in May
Published in The Saudi Gazette on 28 - 06 - 2011

KUWAIT: Kuwait's annual inflation edged up to a five-month top of 5.4 percent in May, the highest level among Gulf oil producers, and living costs in nearby Qatar rose slightly to match March's reading, data showed Sunday.
Inflation in the Gulf was expected to creep higher this year on robust global commodity prices, a weak dollar and increased government spending following unrest in the Arab world.
However, slow lending growth and ongoing weakness in the property sector in some of the countries are seen keeping consumer price growth well below record, double-digit peaks seen in most Gulf states in 2008, despite oil prices staying above $90 per barrel now.
In Kuwait, inflation has been hovering above 5 percent since the beginning of this year. It stood at 5.3 percent in April, after climbing to a nearly two-year peak of 6 percent in December.
On the month, consumer prices in the OPEC member, which saw limited protests over the past few months, grew 0.3 percent in May, up from a 0.2 percent rise in the previous month, as food costs rose sharply for the third month in a row, statistics office's data cited by the state news agency KUNA showed.
"As long as food prices don't go up too much further than the international level, then I suspect we might be quite near a short term peak for year-on-year inflation, and it could ease back in coming months towards 5 percent," said Daniel Kaye, senior economist at the National Bank of Kuwait.
"Inflation remains not perhaps a burning issue for the (monetary) policy authority in the region yet," he said.
Kuwait's central bank governor was quoted Sunday as saying interest rates were at a suitable level, and a dinar peg to a basket of currencies was helping to curb inflation, mostly driven by rising import costs.
The May inflation figure comes within the Kuwait central bank's 5-6 percent forecast from March.
Central banks in the Gulf, which needs to import most of its food needs, have limited tools to combat price pressures as most of the region's currencies are linked to the greenback.
In Qatar, whose economy is powering ahead at a double-digit clip, inflation was also slightly higher in May, at 1.7 percent year on year and 0.2 percent on the month, compared with April.
"These numbers are very benign and point to a stabilisation of inflation," said Fabio Scacciavillani, chief economist at Oman Investment Fund.
"I do not see anything changing the outlook between now and the end of the year, unless anything unexpected happens linked to a sovereign default in Europe or stalemate on US debt ceiling discussions," he said.
A Reuters poll this month showed analysts expected average price growth at 5.1 percent in Kuwait and 3.2 percent in Qatar this year. US lawmakers hardened their positions on Friday in a divisive debate over taxes and spending, aimed at heading off a default on the government's debt, which could send markets plunging around the world.
Greece, whose MPs vote on austerity measures Wednesday, needs to get another slice of a 110 billion euro ($156 billion) EU/IMF bailout worth 12 billion euros, without which the country would be unable to cover pressing funding needs.


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