In a recently released report by Jadwa Investment on inflation in the Saudi economy, the Riyadh-based firm found that inflation in Saudi Arabia had reached a new 5-year high as a result of recent energy price reforms that have increased domestic energy costs.
“The inflationary impact of the recent hike to energy prices is similar to previous incidences when similar measures were taken,” the firm said.
Additionally, the firm found that the Saudi Consumer Price Index accelerated sharply to 4.3 percent year-on-year in January, its highest in five years, as higher energy prices contributed to a significant rise in the housing and utilities, and transport segments.
One of the sectors most impacted by the new energy prices is, understandably, transportation, which recorded a sharp acceleration from 1.3 percent in December to 12.6 percent in January, its highest in 21 years, impacted directly by higher fuel prices, the bank said. Noting that, “In 1995, the last time the government hiked prices in a similar fashion, annual transport inflation rose by 15 percent…”
The report states, “We anticipate domestic inflationary pressure to intensify during the year, driven by second-round effects stemming from the recent energy price reforms.”
[Click here to read the full report as a .PDF from Jadwa]
