UK Inflation Slows to Near Three-year Low

A general view shows Palace of Westminster, home to the Houses of Parliament, and the Elizabeth Tower, commonly known by the name of the bell "Big Ben", in London on June 15, 2023. (Photo by Daniel LEAL / AFP)
A general view shows Palace of Westminster, home to the Houses of Parliament, and the Elizabeth Tower, commonly known by the name of the bell "Big Ben", in London on June 15, 2023. (Photo by Daniel LEAL / AFP)
TT

UK Inflation Slows to Near Three-year Low

A general view shows Palace of Westminster, home to the Houses of Parliament, and the Elizabeth Tower, commonly known by the name of the bell "Big Ben", in London on June 15, 2023. (Photo by Daniel LEAL / AFP)
A general view shows Palace of Westminster, home to the Houses of Parliament, and the Elizabeth Tower, commonly known by the name of the bell "Big Ben", in London on June 15, 2023. (Photo by Daniel LEAL / AFP)

Britain's annual inflation rate slowed to a near three-year low in April as energy prices cooled further, official data showed Wednesday, boosting the governing Conservatives before this year's general election.

The Consumer Prices Index slowed to 2.3 percent from 3.2 percent in March, the Office for National Statistics revealed in a statement, though it was still faster than the 2.1 percent analysts were expecting.

April marked the lowest level since July 2021, when inflation had stood at the Bank of England's 2.0-percent target.

The news comes after the British central bank this month signalled a summer interest rate cut, as it held borrowing costs at a 16-year peak of 5.25 percent to further dampen price rises.

Following the inflation data, most analysts said a rate reduction was unlikely to occur as soon as June, when the European Central Bank is forecast to decrease eurozone borrowing costs, AFP reported.

The Federal Reserve is also expected to cut US interest rates this year as global inflationary pressures subside.

Sharply lower inflation sets the scene for this year's general election, as beleaguered Prime Minister Rishi Sunak's Conservatives trail the main opposition Labor Party in opinion polls.

"Today marks a major moment for the economy, with inflation back to normal. This is proof that the plan is working and that the difficult decisions we have taken are paying off," insisted Sunak, who has made cutting inflation a top priority.

However, Labor finance spokesperson Rachel Reeves slammed the Tories' stewardship of the economy, which emerged in the first quarter from a shallow recession.

"Inflation has fallen but now is not the time for Conservative ministers to be popping champagne corks. Prices have soared, mortgages bills have risen and taxes are at a seventy year high," Reeves argued.

Prices are still rising on top of the sharp increases seen in recent years but at a far slower rate, with businesses and households weathering a cost-of-living crisis.

That has been worsened by elevated BoE interest rates which ramp up the cost of loans, denting disposable incomes and company investment, thereby crimping economic activity.

 



IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
TT

IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)

The International Monetary Fund (IMF) has praised Saudi Arabia’s significant economic changes under the “Vision 2030” national transformation plan, noting improvements in public finances and business regulations.
An IMF mission expected non-oil growth in Saudi Arabia to reach around 3.5% in 2024, crediting careful economic policies and major reforms.
The mission also highlighted record-low unemployment rates and controlled inflation in the country, and welcomed recent updates to funding requirements aligned with “Vision 2030” goals.
The IMF released a concluding statement at the end of its official staff visit to Saudi Arabia.
In the statement, the IMF said: “Saudi Arabia’s unprecedented economic transformation is progressing well.”
“Prudent macroeconomic policies, transformative changes—including through fiscal reforms and in the regulatory business environment—and strong domestic demand have helped prop up non-oil growth. Inflation remains contained.”
“Spending reprioritization and recalibration of major spending programs are ongoing. Efforts to diversify the economy have started to bear fruit.”
“Building on these successes, it will be important to sustain the non-oil growth momentum, maintain financial sector stability, continue mitigating risks of overheating, reverse declining total factor productivity and ensure inter-generational equity.”
Economic Activity Remains Robust
According to the IMF, real non-oil growth decelerated from 5.3% in 2022 to a still robust 3.8% in 2023, driven mostly by private consumption and non-oil investment.
While non-oil growth for Q1-2024 indicates some moderation in economic activity— the IMF staff estimated that the output gap remains in positive territory, close to 2% of the non-oil potential GDP.
The statement also noted that the Saudi economy weathered the geopolitical tensions in the Middle East well, thanks to minimal trade and financial exposures to the affected regions and uninterrupted shipments.
Unemployment Rate Reached Historic Lows
In 2023, the Saudi economy added over one million jobs, primarily in the private sector. The overall unemployment rate for Saudis dropped to 7.7% in the last quarter of 2023—inching closer to the 2030 Vision objective of 7%.
Labor force participation rates have remained at historically high levels but relatively flat over the past year for both men and women, albeit with the women’s rate still comfortably exceeding the Vision 2030 goal of 30%.
Headline Inflation Has Decelerated Rapidly
After peaking at 3.4% in January 2023, year-on-year inflation receded to 1.6% in April 2024, helped by an appreciating nominal effective exchange rate.
However, rents are growing at a brisk rate of about 10% amid inflows of expatriate workers and large redevelopment plans in Riyadh and Jeddah.
Wholesale prices have also edged up recently, reflecting an increase in input costs. So far, some uptick has been observed in the wages of high-skilled workers.
Additionally, the current account surplus narrowed significantly.
The decline in the current account surplus from 13.7% of GDP in 2022 to 3.2% of GDP in 2023 mainly reflected lower oil exports and strong growth in investment-related imports.
These were partly mitigated by a record surplus in the services balance, including a 38 percent surge in net tourism income.
The Saudi Central Bank’s (SAMA) holding of net foreign assets reached $423.7 billion in April 2024, which was slightly above the end-2023 level.
Reserves remain ample, representing 15.6 months of imports and 208% of the IMF’s reserve adequacy metric by end-2023.