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Sun 27 May 2007 01:02 AM

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Saudi inflation drops after surge

Central bank says inflation has declined for the first time in several months.

Saudi Arabia's annual inflation rate was 2.2 % in the first quarter of this year, the central bank said on Saturday, showing its first decline in several months.

"The average cost of living index showed during the first quarter of 2007 ... an annual rise of 2.2 %," the Saudi Arabian Monetary Agency (SAMA) said in a quarterly economic report.

It gave no comparative figure for the same period of 2006.

SAMA did not provide inflation figures for the month of March as it usually does in monthly economic reports.

The latest monthly report showed annual inflation at 3 % in February compared to 2.98 % in January due mainly to rises in prices of food and beverages.

Until recently, inflation had barely exceeded 1.4 % for more than five years.

Inflation had been on the rise for more than a year due to a boom fuelled by record oil revenues and a slide against other currencies of the U.S. dollar to which the Saudi riyal currency is pegged, spiking the cost of non-dollar imports, analysts say.

Hamad Saud al-Sayyari, SAMA's governor, said earlier this week that inflationary pressures were temporary and attributed them solely to economic growth.

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