Saudi central bank sees moderate price pressures in Q3

Saudi central bank sees moderate price pressures in Q3

Price growth during Ramadan seasonal and limited; Analysts forecast annual inflation of 5.6 pct in 2011

August 21, 2011 11:42 by Reuters

Saudi Arabia’s central bank expects inflationary pressures in the biggest Arab economy to continue at a moderate pace in the third-quarter of this year, it said on Saturday.

Consumer prices in the world’s top oil exporter are expected to climb further this year due to surging global food prices and following a government announcement earlier this year that it plans to spend more than $130 billion on social projects.

“Data shows… the possibility of continuation of inflation pressures within moderate levels during the third-quarter of 2011,” SAMA said on its website. (www.sama.gov.sa)

Analysts polled by Reuters in June expect average inflation in the OPEC member to reach 5.6 percent in 2011.

Annual inflation in the kingdom edged up to 4.9 percent in July, from 4.7 percent in June, on rising prices of food, products and services, while monthly inflation was the fastest since early 2008, data showed this week.

“The increase in consumer spending during the month of Ramadan and Eid may be accompanied by a seasonal rise in prices, but is limited due to price competition between traders and retailers of food and goods,” SAMA also said.

Food prices usually surge around Ramadan, the Muslim’s holy month of fasting which began on Aug. 1, as families enjoy more elaborate evening meals after they break their fast at sunset.

Some analysts expect that inflation in the third quarter will grow at a higher rate than the central bank’s forecasts due to increased spending during the summer period and Ramadan.

“There is an agreement that inflation will rise but the difference is in how strong this rise will be,” said Abdulhamid al-Amri, a member of the Saudi Economic Association think tank.

“There is always a higher rise in the second-half of the year because of the seasonality and because of Ramadan… I believe the rise will be higher than the ‘moderate’ pace predicted,” he said. (By Asma Alsharif and Martina Fuchs; Editing by James Jukwey)