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Saudi inflation drops on food
Published in The Saudi Gazette on 14 - 04 - 2011

JEDDAH: Saudi Arabia's annual inflation eased to 4.7 percent in March thanks to a monthly dip in food prices, data showed Wednesday.
Inflation in the Kingdom has been falling since it touched 18-month highs of 6.1 percent in August, and slowed to a 10-month low of 4.9 percent in February.
On a monthly basis, Saudi consumer prices rose by 0.3 percent in March, slightly up from a 0.2 percent increase in the previous month, data from the Central Department of Statistics showed.
But analysts say demand will be boosted by a package of government handouts and see inflation averaging 5.6 percent this year, leading the Kingdom's central bank to keep interest rates unchanged at 2 percent.
That contrasts with Qatar, which cut its main overnight deposit rate by 50 basis points last week in a move analysts said would boost domestic lending and ease capital inflows.
Private sector credit rose by 6.3 percent year-on-year at the end of February, compared to 1.6 percent in the same period last year.
Central Bank Governor Muhammad Al-Jasser said in January that lenders had taken enough measures against bad loans and lending would accelerate this year.
"I would not expect inflation to continue to go down by this much because it has already declined by a substantial amount," said John Sfakianakis, chief economist at Banque Saudi Fransi.
"We should see in the coming months an increase. I am surprised inflation has fallen this amount in such a short period of time."
"We don't expect a change in benchmark interest rates in 2011, unlike Qatar last week," said Monica Malik, chief economist at EFG-Hermes in Dubai. "On the one hand, credit growth is starting to recover, and the central bank and policy makers would want to see a continuation of that.”


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