Kuwait inflation 'to fall to 7-8% by end of year'

Inflation in Kuwait, the only Gulf Arab state whose currency is not pegged to the dollar, is likely to decrease before the year end, but will remain in double digits, the National Bank of Kuwait (NBK) has said.

Inflation in September is likely to rise but the consumer price index (CPI) will be 7-8 percent by year-end, putting inflation at 10 percent for the year compared to 5.5 percent in 2007, according to the bank’s latest economic brief.

Rising global food prices and soaring rents continue to plague states across the Gulf, the world’s biggest oil-exporting region, where economies are booming on a more than six-fold rise in oil prices since 2002.

“Price pressures in Kuwait may well be affected by the same factors at play on the international scene: slower growth, tighter money, and abating pressure on commodity prices,” said the report.

Kuwait’s inflation eased slightly to 11.1 percent in May from a record high of 11.4 percent in April said the report.

The increase in food and housing costs are being blamed for record high rates of inflation. In May food inflation was 10.8 percent while housing related costs were 15.3 percent.

“Down the road, food prices ought to benefit, from lower commodity prices, provided housing services - mostly rent - is a bit trickier to interpret near-term because rents are surveyed and updated only once per quarter,” said the report.

Last week it was reported that the government had approved a set of proposals from a committee tasked with developing a strategy to fight inflation, including a recommendation of more subsidies.

Proposals included a wider range of subsidies and supporting some food firms in sectors such as livestock and flour mills to reduce prices for consumers.

Earlier this month, the government allowed cooperative supermarkets, where nationals can buy subsidised food, to import commodities directly, cutting out wholesale importers in an effort to reduce prices at the till, according to a decree published in the official gazette.

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