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Global commodity prices boom rises inflation in Saudi Arabia

Commodity prices

The rise in commodity prices globally has led to an inflation increase in the Kingdom of Saudi Arabia, last June, compared to the previous month.

The Saudi Statistics Authority said that consumer prices rose to 6.2% in June, compared to 5.7% last May. The rise is driven by the rise in commodity prices globally.

According to the authority, the value-added tax still casts a shadow on consumer prices. The authorities began implementing VAT in the middle of last year 2020.

Commodity prices

The prices of several groups have increased on an annual basis. Most notably the increase in transport prices by 22.6%, affected by the increase in vehicle purchase prices by 10.6%, and the operating prices of personal transport equipment by 56.2%.

Food and beverage prices increased by 8.1%, affected by an 8% increase in food prices, tobacco prices increased by 12.3%, and the communications department increased by 13.2%.

The consumer price index in Saudi Arabia reflects changes in the prices that consumers pay for a fixed basket of goods and services consisting of 490 items.

Inflation in Saudi Arabia also rose last June for the 18th consecutive month, as it contracted during 2019, and then began to rise since then.

The Coronavirus pandemic affected the global economy in general, including Saudi Arabia, especially with the decline in oil prices to its lowest levels, accompanied by a lack of demand for it, in addition to long months of closure to confront the outbreak of the pandemic.

Economy recovery

In a related context, the International Monetary Fund expected the continuation of the recovery of the non-oil economy in Saudi Arabia. The recovery began in the second half of the past year 2020.

According to the IMF, the kingdom’s non-oil growth is expected to reach 4.3% this year. Non-oil sector growth contracted by 2.3% last year.

IMF stressed that the Saudi economy continues to recover well a year after the outbreak of the Coronavirus pandemic. The necessary government measures are taken to confront it.

While fiscal consolidation at the government level may slow the pace of growth, it is expected that this effect will be balanced by increased investments by the Public Investment Fund and the strength of private demand, the fund added.

It is expected that the real oil GDP growth will reach -0.4% in 2021, assuming the continuation of oil production according to the path agreed upon among the countries of the OPEC+ alliance.

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