2 Minute Read by Reuters Staff (Reuters) – DUBAI, July 15 (Reuters) – The annual inflation rate in Saudi Arabia increased to 6.2 percent in June, the highest this year, from 5.7 percent in May, according to government figures released on Thursday. The increase in June was the third in a row, reflecting a hike in the value-added tax implemented last year. “While consumer prices continue to reflect an increase in the value added tax (VAT) from 5% to 15% in July 2020, the rise in the CPI was mostly due to higher transportation (+22.6%) and food and beverage (+8.1%) prices,” according to the General Authority for Statistics. The VAT hike occurred as the Saudi government sought to replenish state coffers, which had been depleted by the twin shocks of last year’s oil price drop and the COVID-19 outbreak, as well as voluntary oil production limits implemented to assist stabilize world prices. Saudi Arabia, the world’s top oil exporter, imposed a restriction on domestic gasoline prices for July last week to assist alleviate growing living costs. Consumer prices climbed by only 0.2 percent month over month in June, according to the statistics authority. According to London-based Capital Economics, inflation will begin to fall in July as the base effect of the VAT rise is removed from the annual price comparison. The headline rate is expected to fall to approximately 1%-1.5 percent year on year, according to the report. According to the International Monetary Fund, yearly average inflation will be 3.2 percent this year. Davide Barbuscia contributed reporting, and Jason Neely edited the piece./n
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