Saudi Arabian Monetary Agency (SAMA) expects inflationary pressures in the biggest Arab economy to continue at a moderate pace in the third-quarter of this year, it said Saturday. Consumer prices in the world's top oil exporter are expected to climb further this year due to surging global food prices and following a government announcement earlier this year that it plans to spend more than $130 billion on social projects. "Data shows... the possibility of continuation of inflation pressures within moderate levels during the third-quarter of 2011," SAMA said on its website. (www.sama.gov.sa) Analysts polled by Reuters in June expect average inflation in the OPEC member to reach 5.6 percent in 2011. Annual inflation in the Kingdom edged up to 4.9 percent in July, from 4.7 percent in June, on rising prices of food, products and services, while monthly inflation was the fastest since early 2008, data showed this week. "The increase in consumer spending during the month of Ramadan and Eid may be accompanied by a seasonal rise in prices, but is limited due to price competition between traders and retailers of food and goods," SAMA further said. Food prices usually surge around Ramadan as families enjoy more elaborate evening meals after they break their fast at sunset. Some analysts expect that inflation in the third quarter will grow at a higher rate than the central bank's forecasts due to increased spending during the summer period and Ramadan. "There is an agreement that inflation will rise but the difference is in how strong this rise will be," said Abdulhamid Al-Amri, a member of the Saudi Economic Association think tank. "There is always a higher rise in the second-half of the year because of the seasonality and because of Ramadan... I believe the rise will be higher than the 'moderate' pace predicted," he said. Saudi Arabia's annual inflation reached 4.9 percent in July 2011, up from 4.7 percent in June 2011, according to the Saudi Central Department of Statistics and information. Prices rose 1.2 per cent on a monthly basis, whereas CPI reached 135.8. The increase is attributed to the growth in demand during the summer season as well as the build up for the month of Ramadan. Beltone Financial, a leading Cairo-based investment bank, expects inflation to accelerate throughout 2011 on basis of growth in money supply. It, however, forecasts that the weakening global commodity prices will offset some of the imported inflationary pressures in Saudi Arabia. A possibly depreciating US dollar could increase Saudi Arabia's cost of imports and force inflation rate to soar, according to the investment bank's note. However, this would not have a drastic effect as commodity prices are expected to continue to fall.
