One of the biggest economics variables that concern any population and one that directly impacts them on a daily basis is inflation. When prices rise for energy, food, commodities, and other goods and services, the entire economy is affected.
Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate and government bond yields, and every other facet of the economy.
The inflation graph charts the inflation rates across GCC countries for the last 5 years benchmarked against what generally preserved as a health limits of inflation (1-2%). The rates have been highest for UAE mostly led by the housing market but are expected to decline in 2016 to 3.2%.
Inflation in Saudi Arabia has fallen on an average in the last 5 years but rose in 2016 due to subsidy cuts that drove transportation and commodity prices. The government is looking at fiscal consolidation. Saudi Arabia trimmed energy subsidies in January after a collapse in oil prices slashed government revenue, forcing officials to draw on reserves and issue bonds for the first time in nearly a decade.
The government had given an update in early 2016 that prices of fuel, electricity and water prices would rise as part of a plan to restructure subsidies within five years. Transportation prices in January went up 12.6 percent from a year earlier, while housing, water, fuel and electricity costs increased 8.3 percent, the statistics authority said.
Health care costs increased 5.5 percent. Annual inflation is forecast to accelerate to 2.7 percent in 2016, compared with 2.2 percent last year, according to the median estimate of 11 economists in a Bloomberg survey. In attempting to reduce its reliance on oil, the kingdom is seeking to end the population’s dependence on government handouts.
GCC countries have overall experienced falling inflation rates in the last five years which are expected to rise as countries digging into reserves with lower oil prices look at fiscal consolidation and diversification.