[2008-08-27]  Inflation set to rise at slower pace in Saudi
Saudi Arabia's central bank said yesterday inflation, which hit a 30-year high of 10.6 per cent in June, would continue to rise in the third quarter, but at a slower pace.

However the Saudi Arabian Monetary Agency (Sama) also said annual growth in Saudi money supply, an indicator of future inflation, eased for a second consecutive month last month.

"Expectations indicate a continuing increase in the inflation rate in the third quarter although at a slower pace from the previous period," Sama said.

The rise of inflation in the third quarter will be slower mainly because of measures the Saudi government has taken to subsidise some staples and also to rising supplies, Sama said. But a rising pace of government spending coupled with an expected increase in consumer spending will continue to fuel inflationary pressures in the third quarter, Sama noted.

The third quarter will coincide with the start of both Ramadan and the new school year as well as some religious celebrations, all of which fuel spending. Housing prices are also expected to at least stabilise if not increase because of a shortage of housing units in the main cities of the kingdom and limited property development resulting from a rise in both the prices of land and construction input costs, it added.

The annual growth of M3, the broadest measure of money circulating the Saudi economy, reached 20.85pc last month down from 21.34pc in June. The drop in the annual money supply growth follows steps taken by Sama over the past 10 months which nearly doubled reserve requirements banks have to make to soak up liquidity.

Source: Daily News