Weak dollar will push Saudi inflation to 5.1%

Riyadh: Saudi Arabia's inflation is poised to reach 5.1 per cent in 2009 as the weak US dollar pushes up prices in the final months of the year, according to Banque Saudi Fransi yesterday.

"We revised up our estimate for average inflation for 2009 to 5.1 per cent," John Sfakianakis, chief economist at Banque Saudi Fransi, said in a research note. "Price rises could accelerate in the first quarter of 2010 should dollar weakness be sustained over the short term, firming up imported inflation," the report said.

It forecast inflation rate to reach 4.6 per cent in 2010. Saudi inflation peaked at more than 11 per cent in July 2008. "We believe the dollar should strengthen somewhat during 2010, but domestic inflation is likely to stay at historically high levels," Sfakianakis added in the note.

The Saudi central bank said on Wednesday that the kingdom would face inflationary pressures during the fourth quarter but they will be mostly due to seasonal factors.

However, the central bank and finance ministry do not issue full inflation forecasts.

Inflation in Saudi Arabia rose to an annual 4.4 per cent in September from 4.1 per cent in August, its first increase in four months, which coincided with Ramadan, which typically increases consumer demand.