Business | Economy
Inflation stabilising in Gulf but pressures from high prices linger
Gulf inflation showed signs of moderating yesterday after months of rapid rises drove it to record levels, but pressures from elevated food and housing costs threaten to plague the region for years.
- Reuters
- Published: 23:47 July 29, 2008
- Inflation in Saudi Arabia, Kuwait and three other states in the world's biggest oil-exporting region began accelerating in the second half of last year, soaring above 10 per cent in all states in the first half of this year.
- Image Credit: Bloomberg News
Dubai: Gulf inflation showed signs of moderating yesterday after months of rapid rises drove it to record levels, but pressures from elevated food and housing costs threaten to plague the region for years.
Kuwait's red hot inflation cooled slightly in May while Bahrain price rises steadied, new data showed, one day after money supply figures from Saudi Arabia, the Gulf's biggest economy, indicated that price pressures may wane.
Inflation has been a source of stress in the Gulf, where most states rely heavily on migrant labour.
Inflation in Saudi Arabia, Kuwait and three other states in the world's biggest oil-exporting region began accelerating in the second half of last year, soaring above 10 per cent in all states in the first half of the year.
Government measures
Headline inflation rates would likely begin to level off on Gulf government measures to control rent rises, new housing supply and lower global food price increases, analysts said.
"Inflation cannot continue to go up at such a rapid pace," said Paul Gamble, head of research at Jadwa Investment.
"Increases in food and commodity prices have slowed down now. But the worst isn't over. It's going to take a number of years for it to go down significantly."
In Kuwait, inflation eased slightly to 11.1 per cent in May after five months of rises took it to a record 11.4 per cent in April, government data obtained by Reuters showed.
Kuwait broke ranks with its Gulf neighbours preparing for monetary union in May 2007 when it severed its currency's link to the weak US dollar to tackle imported inflation.
Prices in Bahrain, the smallest Gulf economy, also stabilised at 3.1 per cent in June, the state's Central Informatics Organisation said. Data showed food prices fell 6 per cent in June from the month earlier.
Dollar pegs in most Gulf states have driven up import costs as the US currency fell to record troughs against the euro as recently as this month.
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