Inflation is a manageable side-effect of increases in broad money supply driven by high oil prices, they say.

That this liquidity is being channelled into overseas assets and domestic infrastructure is the main reason for this positive view, as it is seen as laying the foundations for diversified economic activity that will provide sustainable revenue streams in the long term.

But in this time of plenty, Riyadh must be careful not to lose sight of the plight of the people worst affected by inflation: those on low incomes. The cost of wheat and rice has doubled over the past year and the rental inflation index rose by 17 per cent between April 2007 and April 2008.

The government has taken action to bring prices down, through food subsidies, building new houses, investing in overseas agricultural businesses and reducing customs duties on food.

And it is rightly avoiding increasing public sector salaries by double figures, which would only exacerbate the problem.

Tight control of costs and spending is the only way that Saudi Arabia will combat rising inflation, and if this can be delivered, inflation will decrease in the coming years.

Index of all stories: