New data shows rate has dropped from peak of 5.4% in May to 4.2% in November
Kuwait's annual inflation slowed to a 16-month low of 4.2 percent in November with prices unchanged from the previous month, data showed on Monday, and analysts expect price growth to remain at around current levels in the coming months.
Inflation in the world's No. 6 oil exporter had been decelerating since it climbed to a peak of 5.4 percent in May as the impact of higher food prices and government social handouts faded away. It picked up slightly to 4.8 percent in October.
"It is along the lines of expectations. We had an inflationary impulse earlier last year partly because of the global commodity prices, especially food prices, partly because of the increased government spending," said Jarmo Kotilaine, chief economist at National Commercial Bank in Jeddah.
"Much of that impulse has already worked itself into the system and there has not really been anything new to push up the rate of price increases," he said.
In November, housing costs, which account for more than a quarter of consumer expenses, remained flat month-on-month for the second month in a row, the data released by the Gulf Arab country's Central Statistics Office showed.
The pace of monthly food price increases slowed to a five-month low of 0.1 percent in November from 0.3 percent in the previous month, while transport costs edged up by 0.2 percent, the data also showed.
In January, the government announced plans to spend nearly $5bn, or almost 4 percent of its gross domestic product, on cash grants and free food rations for its citizens.
"As long as commodity prices don't start to rebound, it (inflation) may well go lower over the next few months," said Daniel Kaye, senior economist at National Bank of Kuwait.
"We see inflation as remaining quite close to current levels through this year," he said.
Analysts polled by Reuters in December forecast that inflation in Kuwait, which sits on 10 percent of global crude reserves, would average 4.8 percent in 2011, up from 4.0 percent in the previous year, before slowing to 4.5 percent this year.
The OPEC member saw inflation swelling to a historical maximum of 11.6 percent in June 2008 when oil prices soared towards a record high of $147 per barrel in the following month. Kuwait abandoned its US dollar peg in favour of a dollar-dominated currency basket in 2007 to keep price pressures under control.