Saudi Arabia: Inflation moderates in March
Inflation dropped to 1.6% in March, easing slightly from February’s 1.8%. As in past months, weak price rises for food and transport—subdued by government subsidies—kept a lid on price pressures. That said, rent prices continued to rise more quickly than general prices, as has been the case since September 2022, boosted by population growth following recent visa reforms and rapid non-oil economic growth.
In addition, the trend pointed down slightly, with annual average inflation coming in at 2.0% in March (February: 2.1%).
Finally, consumer prices fell 0.10% over the previous month in March, swinging from February’s 0.18% rise. March’s result marked the weakest reading since December 2021.
Our panelists expect inflation to cool slightly in 2024 from 2023, weighed on by the delayed effect of past interest rate hikes and subsidies on fuel and electricity.
Stronger-than-expected rent prices and disruptions to shipping in the Red Sea pose upside risks. A strong U.S. dollar will limit the scope for upside surprises to inflation.
On the outlook, HSBC analyst Simon Williams said:
“[We] see little pressure on consumer price inflation, which has eased over the past year and which we expect to remain low over our forecast period, despite gains in domestic demand. Rents may be an exception, however, as strong growth sees the population expand quickly, exposing capacity limits. The price of capital goods may also rise as development work gains, adding to already high project costs.”