Threat of GCC deflation averted - Standard Chartered

The threat of deflation in GCC countries has been averted and inflation will stabilise in the low single digits, Standard Chartered said in a report on Wednesday.

“With the housing market softening, inflationary pressures in the region have eased,” economists Marios Maratheftis and Philippe Dauba-Pantanacce said in a note to investors.

Even with food prices rebounding after a weakening of the US dollar, inflation is unlikely to exceed levels reached last year, the bank said.

With the majority of the correction in the housing market having already taken place, an expected weakening of the dollar later in the year and improving liquidity, Standard Chartered said it also believes the region has avoided the threat of deflation.

“Disinflationary pressures in the GCC are easing,” it said.
Bahrain said inflation rose to 3.5 percent in May from 3.1 percent in April.

Saudi inflation reached 5.5 percent in May, which was higher than April’s 5.2 percent and the first increase in 19 months.

Some analysts have said a 2.9 percent increase in UAE personal loans following a 0.5 drop in April could be a sign that banks are beginning to lend again, but Standard Chartered cautioned that the increase was relatively small and does not constitute a trend.

The coming few months, especially the period after the quiet summer season, will confirm any improvement in liquidity, it said.

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