Saudi Arabia alone among Gulf Arab oil producers faces accelerating inflation in 2008 with prices rising twice as fast as they did last year, spurred by rents and a dollar-pegged currency, a Reuters poll showed.

Inflation in Saudi Arabia's five Gulf neighbours will ease only slightly in 2008, mostly from near record highs, with region's central banks constrained in the battle to contain rising prices by the need to maintain links to the weak dollar.

"The inflation outlook is bleak for the entire region," said Marios Maratheftis, regional head of research at Standard Chartered Bank, one of 12 economists polled by Reuters between Dec. 9-12 showed.

"Capacity constraints from the housing market will begin to ease slightly next year, but even where inflation is easing in Qatar and the United Arab Emirates, it is easing from a high base," he said.

Prices across the world's biggest oil-exporting region are rising at their fastest pace this decade, spurred by economic growth and government spending of windfall revenue from a near five-fold increase in crude prices since 2002.

Inflation is stirring discontent among migrant labour, which dominates the Gulf's workforce, forcing governments to intervene in markets, and firing investor speculation that central banks will eventually unshackle currencies from the dollar.

Average inflation in Saudi Arabia, the world's largest oil exporter, will rise to a 4.1 percent in 2008, a 13-year high, from 3.8 percent this year, according to the poll. Inflation was 2.21 percent last year.

Saudi Arabia's King Abdullah ordered subsidies on imported rice and baby milk to cushion consumers from inflation. Some of the king's advisers recommended a national wake hike in October.

Subsidies may not be enough to keep Saudi Arabia from the going the way of Qatar and the United Arab Emirates, where rents have soared because builders could not make homes fast enough to keep pace with economic and population growth.

"It seems increasingly clear that the Saudis are attempting to deal with inflation through measures like price subsidies," said Mushtaq Khan, Citigroup Global Markets economist.

"But you may see the same pattern of high inflation because Saudi Arabia doesn't have the system in place to increase housing supply," he said.

With more homes coming on to the market, pressure on rents will ease in both Qatar and the UAE next year.

UAE inflation will accelerate to 10.1 percent this year before easing to 8.9 percent in 2008, the poll showed. Prices rose 9.3 percent in 2006, the fastest pace in 19 years.

Qatar will still have the Gulf's highest inflation rate, although it will slip from a record 12.2 percent this year, to 10.7 percent next year. "You won't see the answer to inflationary pressures from monetary policy because of the pressure of the dollar pegs," said Maratheftis. "Monetary policy tightening needs to take place," he said.

Dollar pegs force central banks to track US monetary policy. The US Federal Reserve has cut borrowing costs by 100 basis points since Sept. 18 to contain the fallout from a mortgage crisis, and most Gulf central banks have followed.

Unable to raise interest rates the Gulf is turning to other measures. Qatar, the richest Arab state per capita, is considering laws, including property rules, to curb inflation, its ruler Sheikh Hamad bin Khalifa al-Thani said last month.

Some emirates in the UAE federation, have imposed caps on rent rises as has Oman where inflation will fall to 3.9 percent in 2008 from 4.4 percent this year, according to the poll.

Kuwait cited inflation as the main reason for its decision to sever its dollar peg in May and track a currency basket. It has since let the dinar gain 5.56 percent against the dollar. Average inflation in Kuwait will fall to 4.3 percent in 2008 from 4.4 percent this year, the poll showed. Inflation in Bah