Inflation in the GCC is ‘significantly lower’ than in most advanced economies, according to a report released by a Kuwait-based investment firm.
It added that the six Gulf countries weathered the Russia-Ukraine conflict-related food supply disruptions by tactfully resorting to varied import sources.
The report – GCC Inflation Update by Kamco Investment – further highlighted the International Monetary Fund’s (IMF) latest Regional Economic Outlook that states that inflation rate in the GCC is set to grow by 3.3 per cent this year and 2.3pc in 2023.
The IMF expects Kuwait’s inflation to average 4.8pc in 2022, the highest in the GCC. Comparatively, the fund projects 2.5pc inflation growth for Saudi Arabia in 2022, the lowest among the GCC.
“On the other hand, the IMF forecasts 3.7pc inflation uptick for the UAE and Oman as compared to 3.5pc for Qatar and Bahrain in 2022,” said the report that was released last month.
The asset management firm indicated that a hike in global food and energy prices, combined with recovering domestic demand from pandemic-induced economic slowdown, had driven Bahrain’s inflation to reach 3.1pc in June this year.
Restaurants, food and non alcoholic beverages and clothing and footwear sectors led Bahrain’s inflation surge with 14.5pc, 7.3pc and 13.9pc Year-on- Year (y-o-y) increases respectively in June.
“Another major contributing factor to the country’s inflation is the doubling of VAT to 10pc which was approved by the Bahraini Parliament in December 2021 as part of a reform of the Gulf States debt laden finances,” the document said.
While indicating that Arab countries have been largely immune to the repercussions of the war and commodity shortages, the report said that inflation rate in the Arab world is expected to rise to 7.5pc this year, compared to 5.7pc last year.
The rate will witness a small decline in 2023 to reach 7pc, according to the Arab Monetary Fund.
“It is expected that the inflation rate in some GCC countries will be affected by changes in the global prices of oil and food,” the report said.
“As a result of global developments, as well as the impact of some countries increasing the VAT rate or implementing the tax, it is expected that the inflation rate in GCC will average at 2.2pc in 2022 and 2.4pc in 2023.”
The GDN reported in July, that His Majesty King Hamad issued directives to distribute additional support for low-income families to counter the effects of rising global prices.
His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, ordered the Social Development Ministry and other relevant authorities to grant an additional month of financial support to low-income families ahead of the Eid Al Adha holiday.
Social Development Minister Osama Al Asfoor revealed that almost 128,000 families benefited from the move.
Surging energy prices in Europe, in the wake of Russia’s invasion of Ukraine, is the main driver of inflation that has affected world economies with millions of households struggling to pay higher bills.
For example, UK inflation topped 10 per cent, highest since 1982, while the Central Bank of Bahrain raised interest rates last month in light of developments in international financial markets.
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