Inflation rates will peak this year in Saudi Arabia, Kuwait, Qatar and the UAE, says Citigroup.
Report claims inflation in Gulf states is peaking
Inflation rates will peak this year in Saudi Arabia, Kuwait, Qatar and the UAE, according to a report published by Citigroup. The report predicts UAE inflation will hit single digits at the end of next year, falling from 11.1 per cent last year to 9.5 per cent in 2009. According to analysts, a general decline in commodity and import prices will cause inflation to slow throughout the various Gulf economies.
"If you look at the numbers, inflation seems to be peaking, or is at least close to a peak across the region," said Paul Gamble, the head of research at Jadwa Investment in Riyadh. Yesterday, official data showed that inflation in Kuwait rose slightly to 11.35 per cent in June, up from 11.08 per cent in May, mainly on the back of rising housing and food costs. Skyrocketing prices have tormented Gulf economies for the past few years, as double-digit inflation rates threaten to destabilise the region's burgeoning economies.
Rising import costs and rampant government spending have both contributed to the rise in prices. Inflation in Qatar reached 16.6 per cent for the second quarter of this year, while Saudi Arabia clocked a 10.9 per cent inflation rate in May. According to the Citigroup report, GDP growth will remain relatively constant in the four countries, except in Saudi Arabia, which will experience nearly no growth next year.