Business | Economy
Kuwait inflation reaches all-time high of 9.5%
Kuwaiti annual inflation surged to a fresh record of 9.5 per cent in January, spurred by strong housing and food costs in the only Gulf oil producer to have scrapped its currency peg to the ailing dollar.
- Reuters
- Published: 00:45 April 25, 2008
Kuwait City: Kuwaiti annual inflation surged to a fresh record of 9.5 per cent in January, spurred by strong housing and food costs in the only Gulf oil producer to have scrapped its currency peg to the ailing dollar.
Inflation is on the rise across the world's biggest oil-exporting region, almost doubling in five months in Saudi Arabia to a 27-year high of 8.7 per cent in February, and holding at 13.7 per cent in Qatar in December, just off a record.
In Kuwait, prices more than doubled in the seven months to January even as the oil exporter allows its dinar currency to rise versus the dollar in a drive to curb imported inflation.
A jump of 16.1 per cent in housing costs - which comprise about 27 per cent of the index - led the rise on Kuwait's All Items Consumer Price Index, government data showed.
Food prices, which make up about 18 per cent of the index, also jumped 7.7 per cent. "The currency basket will make a slight difference but not when you are facing such significant drivers," said Randa Azar-Khoury, group chief economist at the National Bank of Kuwait, the country's largest lender.
"We hear about food prices rising by 60 and 70 per cent for some items. It is a global issue," she said.
Even though it tracks a basket, Kuwait has barely kept up with the dollar's tumble on global markets because the US currency comprises the largest weighting in its basket.
The dinar has risen about nine per cent against the dollar since Kuwait severed its peg on May 20, while the greenback has plunged more than 16 per cent against the euro and almost 13 per cent against a basket of major currencies.
Links to dollar
In addition to supply constraints in the property market, Kuwaiti money supply, an indicator of future inflation, has been expanding rapidly - growing at 27 per cent in January, its fastest pace in at least 14 years.
"We don't see a moderation in Kuwait in rents going forward and at the same time we also see food inflation picking up," said Monica Malik, regional economist at EFG-Hermes.
"Although this has been partly dampened by the dinar appreciation, food prices are rising by a far greater amount."
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