INFLATION RATE GOES UP IN GCC AMID HOUSING PRICES

Wed 08 January 2025:

Consumer price index data from the GCC Statistical Centre shows general inflation rate in the GCC region grew 1.5 per cent year-on-year through the end of September 2024, Oman News Agency reports.

According to the report, the Centre forecast inflation rates in the GCC countries to hover between 2.4, 2.6 and 2.1 per cent in a previous report for 2024 – 2026.

GCC consumer price inflation rate in 2023 was around 2.2 per cent from 3.1 per cent in 2022.

The report said there are still some things that continue to support the decline of inflation in the region such as supply chain improvements, drop in crude oil price, drop in global food price and US dollar appreciation against major currencies and GCC currency pegs to the US dollar.

Kuwait was the most inflationary GCC member at 2.8 per cent annually in September, followed by Saudi Arabia (1.7 per cent), Qatar (0.8 per cent) and Bahrain and Oman (0.4 per cent), the report added.

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Inflation in GCC (Gulf Cooperation Council) countries is influenced by several unique factors. These oil-rich nations, including Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, and Oman, largely tie their economies to energy exports and their currencies to the US dollar. This peg means their monetary policies are influenced by US Federal Reserve decisions, directly affecting interest rates and inflation levels.

Key drivers of inflation in the GCC include rising global energy prices, which can increase transportation and production costs. Additionally, food imports are significant due to limited local agriculture, making the region vulnerable to global food price fluctuations.

Government policies like subsidies and price controls help stabilize inflation, but rapid urbanization, population growth, and infrastructure development often drive housing and service costs higher.

While inflation rates in GCC countries are generally moderate compared to global standards, events like the COVID-19 pandemic, geopolitical tensions, and changes in global oil demand can disrupt this stability, underscoring the need for diversified economies to manage inflation effectively.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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