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Mon 31 Jan 2011 10:20 PM

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Kuwait December inflation at 2-year high, food costs soar

The December figure put the 2010 average inflation in Kuwait at four percent, the same as in the previous year

Kuwait December inflation at 2-year high, food costs soar
SOARING COSTS: The future direction of inflation in Kuwait depends on whether global food prices continue to rise (Getty Images)

Soaring food prices pushed Kuwait's inflation to a two-year high of six percent on an annual basis in December, data from the Gulf Arab OPEC member showed on Monday.

Inflation in the world's fourth largest oil exporter accelerated after August last year as the oil-dependent economy recovered from a sharp contraction seen in 2009.

The December figure put the 2010 average inflation in Kuwait at four percent, the same as in the previous year and in line with the Reuters' poll of analysts.

Living costs in the Gulf desert country, dependent on food imports, rose 5.9 percent year-on-year in November.

On the month, consumer prices jumped 1.6 percent in December, the state news agency KUNA reported, their fastest pace since January 2008, the oil-boom year when Kuwait had double-digit inflation. They were up 0.6 percent in November.

Analysts said the future direction of inflation in Kuwait, already the highest among Gulf oil exporters, depended on whether global food prices continue to rise.

"It depends on what happens with global food and commodities prices, but I don't see prices going much higher than the current levels," said Paul Gamble, head of research at Saudi-based Jadwa Investment.

"We've seen the run-up in food prices so far but I'm not sure if the pace of food price inflation will be as high as it was through 2010," he said.

Surging global food prices, which hit a record high in December, have been one of the reasons behind violent protests that challenge the rule of Egypt's President Hosni Mubarak after toppling Tunisia's president earlier this month.

Gulf oil producers are not expected to see a similar wave of protests that also emerged in countries such as Yemen or Algeria, shielded by their generous welfare systems and growing oil receipts.

In Kuwait, which saw the steepest annual food price rise in the Gulf last year, its emir ordered the distribution of $4bn in cash and free essential food until March 2012.

Food prices, which account for 18 percent of the Kuwaiti inflation basket, jumped 2.7 percent month-on-month in December, KUNA said, citing statistics office data, after rising by 1.6 percent in the previous month.

A Reuters poll in December forecast average inflation in Kuwait at 4.3 percent this year, still well below a record high of 10.6 percent in 2008. Spiralling inflation made the country drop its peg to the dollar in favour of a currency basket in 2007.

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