Inflation in Saudi Arabia cools despite housing rental rises

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Inflation in Saudi Arabia fell from 2.7 per cent in March last year to 1.6 per cent last month, signalling an easing in price increases in the Kingdom.

On a month-on-month basis inflation further slowed from 1.8 per cent in February, according to the General Statistics Authority for Saudi Arabia (GSAT).

“In March 2024, the Consumer Price Index (CPI) recorded a slight decrease of 0.1 per cent compared to February 2024. This monthly inflation index was influenced by a 0.7 per cent decrease in the food and beverage sector, which, in turn, was affected by a 0.6 per cent decline in meat and poultry prices,” said GSAT in its latest note

“Furthermore, the index witnessed decreases in the prices of the following categories: transportation by 0.7 per cent, furnishing and home equipment by 0.7 per cent, recreation and culture by 0.9 per cent, communications by 0.3 per cent, and tobacco by 0.1 per cent,” added the statistics authority.

The Consumer Price Index (CPI) in Saudi Arabia measures prices paid by consumers for a fixed basket of goods and services consisting of 490 items, which are organised into 12 broad categories ranging from food and beverages to health, transport and communications.

However, the biggest category in the inflation basket in Saudi Arabia is that of housing, which makes up just over 20 per cent of all the items measured. This category further includes water, electricity and gas.

In particular, rental prices have risen dramatically from data captured in March 2023, according to GSAT.

“Actual housing rents increased by 10.5 per cent in March 2024, influenced by the increase in villa rents by 9.7 per cent,” said GSAT.

Saudi Arabia does not practice inflation targeting as the country’s currency is pegged to the US dollar at a rate of SAR3.75 to $1.