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Saudi inflation rate rises to 19 month high
Source: BI-ME and Bloomberg , Author: BI-ME staff
Posted: Tue August 28, 2007 12:00 am
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SAUDI ARABIA. Saudi Arabia's annual inflation in July rose to its highest level since December 2005 as housing and food costs increased.

The kingdom's inflation rate rose to 3.8% in July from 3.1% in June, the central department of statistics said today.

"We had expected inflation to increase, but not by such a large jump," Monica Malik, chief economist at EFG-Hermes Holding, Egypt's largest investment bank, told Bloomberg in a telephone interview from Cairo today. "The weakness in the dollar in July will have created imported inflation. This should moderate in August."

Inflation has picked up across all Arabian  Gulf states as record oil prices have fueled state and private spending, creating shortages in housing, infrastructure and services. The weakness of the dollar to which the Saudi riyal is pegged, has made imported goods from Europe more expensive.

The two countries most hit by inflationary pressures are  Qatar and the UAE,  where inflation has crossed the 10% mark.

The dollar declined to a record against the euro and weakened to a 26-year low versus the pound on 24 July  on speculation a rout in subprime mortgages was spreading, slowing U.S. growth.

Rent, fuel and water in Saudi Arabia, the largest Arab economy, increased 7.9% the year to July. The cost of food and beverages increased 5.9%.

Saudi Arabia's inflation rate will average 3% this year, according to the median of six economists surveyed by Bloomberg, and will fall to 2.5% in 2008.

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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