The general level of prices is expected to be relatively stable in Saudi Arabia during the first quarter of 2015, according to Saudi Arabian Monetary Agency (SAMA).
Some commodity prices may witness inflationary pressures due to the royal decree issued on January 29, providing for the payment of two-month salary grant to all Saudi state employees, it added.
However , the projections still show a stable domestic inflation rate as a result of the global decrease in commodity prices, which will have positive impact on the value of Saudi imports, especially with the increase in the purchasing power of the US dollar, to which the Saudi riyal is pegged.
Consequently, the general level of prices is expected to be relatively stable during the first quarter of 2015.
According to SAMA's quarterly inflation report, the IMF projections for commodity prices indicate a contraction in the inflationary pressures on the main groups for 2015. The IMF’s projections for 2015 show a deflation in energy prices by 36.2 percent, metal prices by 10.9 percent, food and beverages prices by 10.8 percent and 10.1 percent respectively, and raw and agricultural materials prices with the least expected deflation rate of 2.2 percent in 2015.
The annual cost of Saudi Arabia’s living index registered an annual increase of 2.4 percent in December 2014, as compared to a monthly rise of 0.1 percent. During the fourth quarter of 2014, it registered an annual increase of 2.5 percent, against a quarterly rise of 0.6 percent, according to Saudi Arabian Monetary Agency’s Inflation Report.
The general cost of living index rose by 0.6 percent in the fourth quarter of 2014 as compared to the preceding quarter, and by 2.5 percent compared to the corresponding quarter of the previous year.
Food and beverages group recorded the highest inflation rate during the fourth quarter of 2014 as compared to the preceding quarter, registering a quarterly inflation rate of 1.9 percent. Furnishings, household equipment and maintenance group came second with 1.4 percent; next was clothing and footwear group and health group with 0.7 percent each; followed by recreation and culture group and education group with 0.5 percent each; next was Tobacco group with 0.4 percent and transportation group with 0.1 percent, the report said.
In contrast, miscellaneous goods and services group recorded the highest quarterly deflation rate of 0.5 percent during the fourth quarter of 2014 as compared to the corresponding quarter of the previous year. Restaurants and hotels group came second with 0.4 percent; followed by telecommunication group with 0.2 percent.
Housing, water, electricity, gas and other fuels group remained unchanged during the fourth quarter of 2014.
General Cost of Living Index
The general cost of living index is affected relatively by the changes taking place in its various groups. In terms of the influence on the cost of living index, the food and beverages group ranked first with 55.3 percent during the fourth quarter of 2014 compared to 28.5 percent in the same quarter of the previous year; followed by the furnishings, household equipment and maintenance group with an influence rate of 16.9 percent compared to 20.3 percent in the same quarter of the previous year and clothing and footwear group with an influence rate of 8.2 percent compared to 2.2 percent in the corresponding quarter of the preceding year. Miscellaneous goods and services group came next with an influence rate of 5.1 percent compared to 0.8 percent in the corresponding quarter of the preceding year.
The total rate of effect of the three major groups (food and beverages; furnishings, household equipment and maintenance; and clothing and footwear groups) stood at 80.4 percent during the fourth quarter of 2014 against 51.0 percent in the respective quarter of the previous year.
Wholesale Price Indices
The wholesale price index registered a quarterly increase of 0.4 percent and an annual increase of 0.7 percent in the fourth quarter of 2014. It had recorded a quarterly increase of 0.2 percent during the third quarter of 2014.
The group of chemicals and other related materials recorded the highest annual increase during the fourth quarter of 2014 compared to the same quarter of the preceding year. This group denoted an inflation rate of 4.6 percent due to a rise in the subgroup of industrial gases by 22.8 percent during the same period. The group of miscellaneous categorized articles recorded the second highest inflation rate of 1.8 percent. This group was affected by an increase of 3.5 percent in the subgroup of other manufactured goods. The group of food and live animals came third with an annual inflation rate of 1.2 percent during the fourth quarter of 2014 due to the increase in the subgroup of fish and crustaceans by 18.9 percent.
In contrast, the group of oils and fats registered the highest deflation rate during the fourth quarter of 2014. This group’s inflation rate went down by 1.6 percent. The group of raw materials excluding fuels, the group of manufactured goods classified by material and the group of machinery and transport equipment came second with a deflation rate of 0.5 percent.
Cost of Living Index by Cities
All cities Cost of Living Index recorded a quarterly increase of 0.7 percent during the fourth quarter of 2014. Jazan city registered the highest rise of 2.7 percent. Riyadh ranked second by 1.5 percent. Dammam and Buraidah ranked third by 0.6 percent each, then Jeddah and Abha by 0.5 percent each, followed by Skaka by 0.3 percent and Madinah by 0.2 percent.
In contrast, cost of living index for Hofuf registered the highest deflation rate during the fourth quarter of 2014 by 1.1 percent.
Al-Baha ranked second by 1.0 percent, followed by Tabuk by 0.7 percent. Then Hail and Makkah by 0.6 percent and 0.5 percent respectively, followed by Najran by 0.4 percent and Arar by 0.1 percent.
GDP Deflator
According to the latest data available by the Central Department of Statistics and Information, the nonoil GDP deflator contracted by 0.9 percent during the second quarter of 2014 as compared to the previous quarter. It recorded an increase of 2.0 percent compared to the same quarter of the preceding year.
The GDP deflator measures inflation rate at the macroeconomic level, which is different from the cost of living index which only targets final consumption. The GDP deflator, however, targets all consumption, investment and government sectors according to their respective contributions to the GDP. Therefore, the deflator is considered as an indirect measure of the change in the general level of prices. The nonoil GDP deflator is usually used to exclude the
impact of change in oil prices on the domestic economy.
Over the last three years, the non-oil GDP deflator recorded the highest annual increase of 9.0 percent during the third quarter of 2012 compared to the same quarter of 2011. Then, it started to decrease gradually, registering increases in the first and second quarters of 2014 by 1.7 percent and 2.0 percent respectively.
An analysis of the GDP deflator data (at constant prices for 1999) by economic activity shows that the activity of electricity, gas and water registered the highest increase of 6.0 percent in the second quarter of 2014 as compared to the preceding quarter. The activity of community, social and personal services came second with 3.3 percent; followed by finance, insurance, real estate and business services with 2.9 percent as a result of a rise in other services by 3.5 percent. The manufacturing activity ranked fourth with an increase of 2.2 percent in the second quarter of 2014 compared to the second quarter of 2013, the SAMA report said.
Import duties activity registered the highest deflation in the GDP deflator of 4.5 percent during the second quarter of 2014 as compared to the corresponding quarter in the preceding year.
A comparison of annual inflation measures in the domestic market indicates that the annual inflation rate of the cost of living index registered the highest increase of 2.7 percent in the second quarter of 2014. Nonoil GDP deflator came second with 2.0 percent during the same period, while the annual change rate of the wholesale price index rose by 0.6 percent during the same period, the SAMA report said.