Inflation in Saudi Arabia accelerated the most in more than three years in January after government subsidy cuts drove up transportation and commodity prices.
Consumer prices rose an annual 4.3 per cent, up from 2.3 per cent in December, the General Authority for Statistics said on its website. That’s the most on an annual basis since October 2012. Consumer prices went up 1.9 per cent on the month, according to the authority.
“The surge in Saudi inflation to 4.3% y/y in January was almost entirely due to the subsidy cuts that were announced alongside the budget,” Jason Tuvey, Middle East economist at Capital Economics in London, said in an emailed note.
“This goes to underline that the government has taken a bold approach to fiscal consolidation and reinforces our view that the economy is likely to slow sharply this year,” he said.
Saudi Arabia pared energy subsidies in January after a collapse in oil prices slashed government revenue, forcing officials to draw on reserves and issue bonds for the first time in nearly a decade. A month earlier, they announced that fuel, electricity and water prices would rise as part of a plan to restructure subsidies within five years.
Transportation prices in January went up 12.6 per cent from a year earlier, while housing, water, fuel and electricity costs increased 8.3 per cent, the statistics authority said. Health care costs increased 5.5 per cent.
In attempting to reduce its reliance on oil, the kingdom is seeking to end the population’s dependence on government handouts. Political analysts had considered subsidy cuts risky after the 2011 revolts that swept parts of the Middle East.
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