According to recent government data, Saudi Arabia experienced a decrease in its annual inflation rate, which eased to 2 percent in August from 2.3 percent the previous month. This downward trend in inflation has been consistent throughout the year.
Inflation decelerated for the third consecutive month, reaching the lowest pace in 14 months.
The primary contributor to inflation was the significant increase in housing rents, which rose by 10.8 percent. This increase had a significant impact on the overall higher prices of housing, water, electricity, gas, and other fuels, which grew by 9 percent, as reported by the General Authority for Statistics.
Food and beverage prices, which were the primary drivers of price increases in the previous year, saw a slight uptick of 0.4 percent. Transport prices also grew by 0.5 percent. However, prices for clothing and footwear, as well as furnishings and household equipment, decreased during this period.
According to the International Monetary Fund (IMF), headline inflation is projected to average 2.8 percent in 2023 before gradually easing to 2.3 percent in 2024. These projections indicate a relatively stable inflationary environment in Saudi Arabia over the coming years.
Read more: Positive prospects for Saudi economy with strong non-oil growth momentum: IMF
Robust trajectory
The IMF stated that Saudi Arabia’s banking system continues to be on a robust trajectory, with high profitability levels surpassing those seen before the pandemic.
According to the report, inflation in Saudi has remained at a low level and is currently showing signs of decline. This is attributed to various factors, including domestic support measures, price caps, and the strengthening of the U.S. dollar.
In 2022, the average consumer price index in the Kingdom increased by 2.5 percent compared to the previous year. As of May 2023, the year-on-year total inflation stood at 2.8 percent. It had previously risen to 3.4 percent earlier in the year.
In the first quarter on an annual basis, Saudi Arabia’s economy recorded a growth rate of 3.9 percent. This expansion was primarily driven by the non-oil sector as part of the Kingdom’s ongoing endeavors to diversify its economy away from hydrocarbons. The growth in sectors beyond oil signifies the progress made in reducing reliance on oil-related activities and fostering economic diversification in Saudi Arabia.
Impressive annual growth
With higher oil prices and a robust performance in its non-oil private sector, Saudi Arabia, the largest economy in the Arab world, achieved an impressive annual growth rate of 8.7 percent last year. This growth rate was the highest among the world’s 20 largest economies. The combination of favorable oil prices and a strong non-oil private sector contributed significantly to the country’s economic expansion, highlighting its resilience and ability to leverage various sectors for sustained growth.
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