Saudi consumer prices fall in April for fourth month in a row

Saudi Arabian consumer prices fell 1.9 per cent year-on-year in April for the fourth month in a row but were unchanged from March, data from the General Authority for Statistics showed.

The annual declines in the consumer price index are partly a consequence of the introduction in January 2018 of a 5 per cent value-added tax (VAT), economists have said.

“We continue to see deflation in yearly terms,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The CPI had risen throughout 2018 after VAT was introduced to boost non-oil revenue generation in response to a long-term drop in oil prices.

After contracting in 2017, the economy grew 2.2 per cent last year, but is forecast to grow more modestly this year.

The International Monetary Fund projects GDP growth of 1.9 per cent, buoyed by an expansion of the non-oil economy as the government steps up spending.

The central bank chief said in February, when asked if he expected deflation this year, that he expected consumer demand and real estate loans would stave it off.

Credit grew in the first quarter by more than 3 per cent, its fastest pace in more than two years, fuelled by a jump in mortgages and in loans to small- and medium-sized enterprises.

Tuesday’s data showed the sub-index for housing, water, electricity, gas and fuel prices down 7.8 per cent from a year earlier.

Prices for food and drinks, however, rose 1 per cent and prices for education rose 1.3 per cent.

This week, the Saudi government imposed taxes on electronic cigarettes and sugary drinks, extending similar taxes introduced in 2017.

Read: Saudi imposes tax on e-cigarettes and sugary drinks