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Analysts warn of resurging inflation in the GCC region

Tighter monetary policies and reduced dependence on exports would help protect region, says Credit Suisse.

May 15, 2010 1:06 by

Analysts at international financial services group Credit Suisse believe that inflation risks in the Gulf countries are re-emerging after a sharp fall in consumer prices from a peak of 11 per cent in 2009, according to the Khaleej Times.

The paper quotes a report from Credit Suisse in the latest issue of Global Insider magazine, in which it argues that the GCC risk is similar to other emerging markets that face possible inflationary consequences in the wake of drastic monetary and fiscal policy measures taken by central banks and finance ministers in response to the global financial crisis.

The Khaleej Times article links Credit Suisse’s warning of fresh GCC inflationary risks to the views held by NCB Capital, which is owned by National Commercial Bank, Saudi Arabia’s largest bank.

NCB Capital observed in a report that the GCC faces the spectre of resurging inflation rates because of strengthening global commodity prices due to growing demand and investors’ appetite.

“There are increasing signs of economic overheating in various emerging markets and inflation is already picking up,” said the Credit Suisse analysts. “The indications are particularly evident in the real estate sector. Countering this trend requires a tightening of monetary and exchange rate policy and a further switch away from exports in favour of domestic demand.”

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