Font Size

- Aa +

Sat 25 Feb 2017 01:12 AM

Font Size

- Aa +

Saudi consumer price deflation likely to be short-lived, say analysts

Jadwa Investment says planned increase in household electricity prices by mid-2017 'should accelerate inflation to early 2016 levels'

Saudi consumer price deflation likely to be short-lived, say analysts
(Fayez Nureldine/AFP/Getty Images)

Consumer price deflation which hit Saudi Arabia in January for the first time in over a decade, is likely to be short-lived, according to Jadwa Investment.

Official data showed on Tuesday that prices fell 0.4 percent from a year earlier last month as last year's economic slowdown pushed retailers and many other companies into discounting their products.

The falls were partly due to the weakness of the Saudi economy, where low oil prices have slashed the government's export revenues and forced it to cut spending.

In its latest research note, Jadwa said government initiatives aimed at stimulating private sector activity should have a positive impact on aggregate demand, and therefore inflation.

It added that the planned increase in household electricity prices by mid-2017 "should accelerate inflation to similar levels witnessed in early 2016", when energy prices were increased last.

January's deflation was driven by food and beverage prices which sank 4.2 percent from a year earlier partly because of a strong US dollar, to which the Saudi riyal is pegged.