The Financial Express

S Arabia inflation jumps to 6.1pc after VAT increase

| Updated: August 18, 2020 12:06:10

File photo used for representational purpose File photo used for representational purpose

Saudi Arabia’s consumer price index jumped 6.1 per cent in July compared with a year earlier, boosted by a tripling of value-added tax, official data showed on Sunday.

The inflation rate in June was 0.5 per cent, the smallest annual increase since January, before the VAT increase to 15.0 per cent from 5.0 per cent came into effect on July 1, reports Reuters.

The jump in annual inflation reflected price increases in most categories, the General Authority for Statistics said. Food and transport were major contributors, rising by 14.6 per cent and 7.3 per cent respectively.

Jason Tuvey, the senior emerging markets economist at Capital Economics, said in a research note that “the pass-through from the VAT hike may be relatively more limited compared with when the tax was first introduced in 2018.

Even so, we expect Saudi inflation to jump to 5.5-6.0 per cent year on year this month and remain around this level for much of the next year.”

Saudi Arabia, the world’s biggest oil exporter, said in May that it would triple VAT as it sought to shore up finances hit by the twin shock of low oil prices and the coronavirus pandemic.

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