Annual inflation in Saudi Arabia rose 1.6% in August, marking a 0.1% hike from levels recorded in June and July.
Impact of Residential Rentals
The General Authority for Statistics notes that the prices for housing, water, electricity, gas, and other fuels saw an 8.9% hike last month.
Additionally, food and beverage prices rose by 0.9%.
The accelerated pace of annual inflation came on the back of a 10.7% increase in residential rent rates, compared to August of 2023.
This is largely attributable to a 10.8% rise in apartment rent rates.
So what
In its latest report, the International Monetary Fund (IMF) projected that the average inflation rate in the Kingdom will reach 1.9% this year and rise to 2% by 2025.
On the other hand, credit rating agency “Standard & Poor’s” (S&P) recently gave its two cents on KSA’s inflation, forecasting that levels would remain stable.
This is in line with the anticipated decision by the U.S. Federal Reserve to lower interest rates.
Some Context
On Friday, S&P affirmed Saudi Arabia’s credit rating in both local and foreign currencies at “A/A-1,” while revising its outlook from “stable” to “positive.”
The global agency pointed to expectations of strong growth in the non-oil sector and economic resilience.
S&P believes the “positive outlook” reflects the government’s ability to achieve further reforms and investments, contributing to the development of the non-oil economy.
This also underscores the strength of the Saudi economy in the face of ongoing fluctuations in the oil and gas sector.
Now what
The S&P report projected continued growth in the Kingdom’s GDP between 2024 and 2027, supported by a sustained increase in non-oil investments and higher consumer spending rates.
The agency also predicted an acceleration of investments to develop new industries such as tourism and further diversify the economy away from hydrocarbons.
Key takeaways from the report include:
– Current investments will boost consumption of the Kingdom’s population, which comprises over 35 million (most of whom are young) while increasing the productive capacity of sectors like manufacturing, logistics, and mining.
– The scale of projects, estimated at over USD 1 trillion, indicates significant financing needs from the government and affiliated institutions, particularly the Public Investment Fund (PIF).
– The state is currently reprioritizing projects based on economic returns and reassessing timelines, suggesting a phased investment implementation approach.
– Saudi Arabia is likely to emerge as a more diversified economy in the long term, creating more jobs for youth and expanding workforce participation.
– The Kingdom will maintain its position as the world’s largest oil exporter, with proven excess production capacity that allows for rapid adjustments in output levels.
– The country is expected to see a boom in construction for Vision 2030 projects and the services sector, supported by consumer demand and an expanding workforce.
