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Saudi Arabia Expands Inflation Gap with the G20 Countries

Saudi Arabia Expands Inflation Gap with the G20 Countries
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Saudi Arabia Expands Inflation Gap with the G20 Countries

Saudi Arabia Expands Inflation Gap with the G20 Countries

Saudi Arabia was able to expand the difference in the inflation rate with the G20 countries and maintain its advanced position, occupying the second place after China, by recording 2 percent in August.

The General Authority for Statistics (GASTAT) announced Thursday that inflation in the Kingdom registered a further decline in August, after reaching 2.3 percent in July. This current level of inflation in the Kingdom is the lowest in a year and a half.

Compared to inflation rates of the G20 countries in August, Saudi Arabia recorded 2 percent, Indonesia 3.27 percent, Canada and Japan 3.3 percent, each, and South Korea 3.4 percent. The inflation rate in America reached 3.7 percent, Mexico 4.6 percent, South Africa 4.7 percent, France 4.8 percent, Russia 5.2 percent, and the Eurozone 5.3 percent.

The rate in Italy reached 5.5 percent, Australia 6 percent, then Germany 6.1 percent, while the United Kingdom recorded a rate of 6.8 percent.

Türkiye and Argentina came at the bottom of the G20 ranking, registering 58.9 percent and 124 percent, respectively.

As for China, it topped the list with the lowest inflation rate of 0.1 percent.

In this context, experts told Asharq Al-Awsat that Saudi Arabia was still controlling inflation through several measures adopted by the government. Those include the Saudi Central Bank (SAMA) raising interest rates, setting the ceiling for energy prices, and resuming grain exports from Ukraine.

Advisor and Professor of Commercial Law Dr. Osama Al-Obaidi, told Asharq Al-Awsat that SAMA’s decision to raise the standard borrowing rates in line with the monetary tightening policy taken by the US Federal Reserve led to curbing inflation.

He added that the drop of the inflation rate in Saudi Arabia was due to the decline in food prices, the establishment of the ceiling for energy prices, the resumption of grain exports from Ukraine, as well as the decrease of housing and education costs.

Al-Obaidi expected inflation rates in Saudi Arabia to continue to shrink during the remainder of this year, between 1 and 1.5 percent on an annual basis, as well as in 2024.

For his part, Economic Expert Mohammad Al-Anqari told Asharq Al-Awsat that several reasons were behind the drop in the inflation rate in Saudi Arabia, including external factors such as the rise of the dollar against global currencies.

GASTAT’s report indicated that the inflation rate last month was affected by an increase in the prices of housing, water, electricity, gas and other types of fuel by 9 percent, in addition to a rise in the prices of food and beverages by 0.4 percent.

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Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations
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Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Türkiye Inflation Exceeds Forecasts, Tempering Rate Cut Expectations

Turkish annual inflation fell to 49.38% in September while the monthly rate was much higher than expected at nearly 3%, setting the stage for later than expected interest rate cuts by the central bank.

At 50%, the central bank's policy rate is now higher than the annual consumer price index (CPI) for the first time since 2021, marking a milestone in an aggressive tightening cycle meant to correct years of easy money and soaring prices.

But after prices came in higher than expected last month, boosted in part by education-related costs, some analysts said the bank was unlikely to be able to ease policy until December at the earliest and possibly not until next year.

The "data makes an interest rate cut this year look very unlikely to us," said Capital Economics in a note.

Month-on-month inflation was 2.97%, according to the Turkish Statistical Institute, above a Reuters poll forecast of 2.2%. Annual CPI was also higher than the poll forecast of 48.3%.

In August, monthly CPI was 2.47%, with the annual rate at 51.97%. The central bank is closely watching the monthly rate for signals of when to begin an easing cycle, though it has only dipped below 2% once this year, in June.

Last month, a Reuters poll showed a growing minority of analysts expecting a first cut next year, with the consensus settled around November and expectations of at least 20 points of easing by the end of 2025.

But Haluk Burumcekci, founding partner at Burumcekci Consulting, said the September data did not signal an imminent cut. Even if October inflation is in line with the central bank's guidance, he said, "it may not be sufficient" for a November cut.

-TIGHT POLICY

The domestic producer price index was up 1.37% month-on-month in September for an annual rise of 33.09%, the data showed.

The lira was slightly firmer at 34.18 against the dollar.

Annual inflation in September was driven by a 97.9% rise in housing prices, with education prices up 93.59%. The key food and non-alcoholic drinks sector prices were up 43.72%, below the overall level.

Last month the central bank held rates steady at 50% for a sixth straight month, saying it remained highly attentive to inflation risks. But it removed a reference to potential tightening, seen as a first signal that easing would eventually come.

The bank, which has hiked rates by 4,150 basis points since June last year, sees inflation falling to 38% at the end of this year and 14% next. In the medium term programme, the government sees end-2024 inflation of 41.5%.