Saudi inflation falls

GCC countries experienced their highest inflation rates for decades in the past two years.

Inflation in Saudi Arabia for November declined to 9.5 per cent from 10.35 per cent in September, an indication that the country's money supply problem is being brought under control, economists say. Over the past two years, GCC countries struggled with their highest inflation rates in decades, a result of the steady depreciation of their dollar-pegged currencies, and rising food and raw material prices.

"Saudi Arabia's lower inflation shows the winding down of the factors that had led to the phenomenal inflation during much of the year," said Fabio Scacciavillani, an economist at Dubai International Financial Centre. Since the the summer when inflation had reached its highest level across the Gulf, the US dollar, which most GCC countries peg their currencies to, has regained against all other major monetary units. Lower transport costs for food as the price of oil tumbled has also reduced inflationary pressure.

Mr Scacciavillani expected the UAE's inflation to decrease faster than Saudi Arabia's. "The real estate sector was the biggest driver of inflation in the UAE, unlike in Saudi Arabia, and so far anecdotal evidence shows that rent in Dubai has stabilised and in some cases it has gone down," he said. [e-mail]