Bahrain central bank pledges to beat inflation

23 May 2008
Bahrain’s central bank governor has vowed to tackle the domestic issues that have contributed to the country’s inflation rate hitting a new record of 5.2 per cent in March.

Central Bank Governor Rasheed al-Maraj tells MEED that while the country has escaped the double-digit inflationary rates experienced by the UAE and Qatar, the high level of the consumer price index (CPI) remains a concern.

“If you look at the component of the CPI for every country in the region and you measure the rises in different components, you will see many of them, like rent and services, are local factors,” says Al-Maraj. “With the new supply of houses and apartments in Bahrain, this could moderate, and hopefully will reduce the negative impact rent has on the CPI. We can see the end of it.”

While the governor expects inflation to cool slightly for the 12-month period, he admits the cost of food could undermine his efforts.

“That is a major concern for us in Bahrain and it is a wild card because we have seen such an increase in food prices in such a short period of time in a very strange way,” says Al-Maraj. “I cannot speculate on what will happen to food prices because that is out of my control.”

He expects Bahrain’s economy to grow by 6-7 per cent in 2008 but says it is too early to predict next year’s growth rate. “There are a lot of changes we are undertaking at the moment in terms of our education and labour reforms, and we will see how this plays out as we go forward,” he says.

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