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Saudi Arabia Inflation April 2021

Saudi Arabia: Inflation picks up in April

Consumer prices increased 0.17% over the previous month in April, contrasting March’s 0.14% fall. April’s print reflected higher prices for transport, and food and beverages.

In April, inflation rose to 5.3% from 4.9% in April. Elevated inflation in recent months has been due to the increase in the value-added tax rate from 5% to 15% back in July 2020. Moreover, depressed activity due to the pandemic last year should have also flattered the headline reading. Meanwhile, annual average inflation increased to 4.8% in April, up from 4.5% in the previous month.

Looking ahead, inflation will likely peak in the second quarter of the year, due to the gradual easing of containment measures and a recovering travel and tourism sector. Moreover, ongoing supply disruptions particularly due to shipping container shortages, which has pushed shipping rates higher will likely continue to push prices higher for consumer goods. That being said, given the stark rise in the VAT tax rate in July last year, inflation will likely ease notably in the second half of the year due to a higher base effect.

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