Arab News, Saturday, Apr 17, 2021 | Ramadan 5, 1442
Saudi inflation slows to 4.9% in March as VAT effect lingers
Saudi Arabia:
Saudi Arabia’s annual inflation rate fell marginally in March as last July’s
increase in value-added tax (VAT) continued to assert an effect on prices.
The consumer price index rose an annual 4.9 percent in March, compared with a
5.2 percent increase in February, the General Authority of Statistics (GASTAT)
said in a statement on Thursday.
The inflation rate jumped to 6.1 percent in July 2020 from 0.5 percent in June
as the VAT rate was increased from 5 percent to 15 percent and has mainly been
drifting lower since.
The biggest contributors to March’s reading were food and beverage prices, which
increased 10.2 percent from a year earlier, driven by a 12 percent increase in
the cost of meat and 10.9 percent higher prices for vegetables, GASTAT said.
Transport costs rose 10.5% as vehicle prices rose 9.6%, while tobacco gained
13.1 percent and communication added 13.2 percent.
The cost of education fell 9.5 percent year over year, while housing, water,
electricity, gas and other fuels declined 2.7 percent, driven by a 3.9% drop in
housing rentals.
Saudi Arabia’s acting information minister said in November last year the
kingdom could review its VAT increase once the coronavirus pandemic ends.
Analysts at Al Rajhi Capital predicted the higher VAT rate would generate SR28
billion ($7.5 billion) in 2020 and SR88 billion in 2021 if maintained.
In 2018, Saudi Arabia and the UAE became the first two countries in the Arabian
Gulf to introduce VAT.