Saudi Arabia: Inflation continues to accelerate in June
July 16, 2021
Consumer prices increased 0.15% over the previous month in June, marginally weaker than May’s 0.18% rise. June’s print reflected lower prices for clothing and footwear, which was partially offset by stronger prices for transport.
In June, inflation rose to 6.2% from 5.7% in May. Elevated inflation over the past year has been due to the increase in the value-added tax rate from 5% to 15% back in July 2020. In addition, the stark fall in activity due to the pandemic last year should have also boosted the headline reading. Meanwhile, annual average inflation increased to 5.7% in June, up from 5.2% in the previous month.
Looking ahead, inflation will likely begin to taper in H2 2021, as the impact of a low base effect from the tripling of the VAT and recovering economic output begins to fade. That being said, the ongoing economic recovery and relatively higher oil prices will keep inflation upbeat, nonetheless.
Author: Steven Burke, Economist