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Saudi sees moderate inflation pressures in Q2

Riyadh, May 25, 2011

Saudi Arabia's central bank expects to see moderate inflationary pressures in the Gulf oil producer in the second quarter of this year, it said in a quarterly inflation report on Wednesday.

Inflation in the world's top oil exporter has eased since touching an 18-month high of 6.1 per cent in August 2010 as a rise in food costs subsides.

"Available data show possible continued domestic inflationary pressures, at moderate rates, during the second quarter of 2011," the central bank said in the report published on its website.

Consumer price growth in the largest Arab economy reached 4.8 per cent year-on-year in April, still fuelled by high food prices.

The central bank also said construction of new housing units following the king's spending package should contribute to decrease the inflation rate in the medium and long term.

The Kingdom has pledged to spend an estimated $130 billion, or around 30 per cent of its annual economic output, on new houses, creating jobs, unemployment benefit and other measures.

Central Bank Governor Muhammad al-Jasser said in March handouts by the king were not likely to exacerbate inflation, although analysts challenged this view, saying the package would fuel household consumption.

Analysts see price pressures building up in the next months mostly due to the traditional pressures on food costs during Ramadan, which starts in August.

A Reuters poll in March showed analysts expected average Saudi inflation of 5.6 percent this year, up from 5.3 per cent last year.-Reuters




Tags: inflation | Saudi | pressure | food costs |

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