Saudi Arabia's inflation rate rises to 4 per cent

31 December 2009

Kingdom’s peg to a weak dollar hits economy

Inflation in Saudi Arabia climbed to 4 per cent in November as the economy appeared to move out of a cycle of steadily falling inflation rates, according to new statistics from the Saudi Arabian Monetary Agency.

The October inflation rate of 3.5 per cent was the lowest since June 2007.

Saudi Arabia’s inflation rate will average 4.4 per cent in 2010 as the country’s peg to a relatively weak US dollar forces it to import inflation, says Monica Malik, economist at EFG-Hermes, an Egyptian investment bank.

However, as 4.4 per cent remains lower than the average rate of inflation in 2008 and 2009, the central bank will leave interest rates at current levels until the second half of 2010 at the earliest, says Malik.

The Saudi authorities will continue their efforts to make the banks lend more money to businesses, she says.

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