Business | Economy
Soaring food prices and rents spur Oman inflation to fresh record
Inflation in Oman accelerated to a record 12.4 per cent in April as soaring global food prices and rents intensify price pressures across the world's biggest oil-exporting region.
- Reuters
- Published: 23:06 June 16, 2008
Dubai: Inflation in Oman accelerated to a record 12.4 per cent in April as soaring global food prices and rents intensify price pressures across the world's biggest oil-exporting region.
Food, beverage and tobacco costs - which account for almost a third of the consumer price index - jumped 21.6 per cent in the year to April 30, the Omani Ministry of National Economy said on its website on Monday.
Rents also underpinned the index's 11th straight monthly rise, surging 16.2 per cent in April.
Oman's consumer price index hit 122.1 points on April 30 compared with 108.6 points a year earlier, the data showed. Prices rose 1.2 per cent over March.
Inflation is accelerating across the Gulf Arab region, where most countries, including Oman, peg their currencies to the ailing dollar, which is driving up import costs.
But currency weakness is only part of the problem, accounting for about a fifth of inflation guided largely by high global commodity prices, Oman's central bank chief, Hamood Sangour Al Zadjali, said in February.
Prices for cereals jumped 36.7 per cent and milk and milk products 30.4 per cent in April, the data showed.
"What happens next depends very much on global food prices and the US dollar," said Monica Malik, a regional economist at EFG-Hermes investment bank.
"Inflation in Oman and the wider Gulf will remain elevated going forward as strong economic growth increases demand, particularly for housing," she said.
Zadjali has repeatedly said Oman is committed to keeping a dollar peg that has helped it attract foreign investments. But forward rates show investors betting the Oman riyal could rise 2.7 per cent in a year.
Supply constraints
As local real estate and global food supplies improve, Gulf inflation will ease, UAE Central Bank Governor Sultan Nasser Al Suwaidi said in remarks published by Arabian Business this week.
Inflation probably hit a 20-year peak of 11.4 per cent last year in the UAE, according to a Reuters poll in May. The UAE releases inflation data only once a year.
"Inflation is a short-term, temporary issue here because it is derived from the real estate market which must eventually stabilise," Al Suwaidi was quoted as saying.
But inflationary pressures are far from over as Gulf economies boom following the rise in oil prices to repeated record highs, which is driving investment in infrastructure, industry and real estate.
In response to inflation, Gulf governments have increased price controls, boosted subsidies and raised employee wages.
Earlier this year, Oman's Sultan Qaboos bin Said ordered an increase of up to 43 per cent in state workers' wages.
Oman's central bank raised bank reserve requirements for the third time in less than a year last week to force lenders to keep more money in their vaults.
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