On August 16th, 2020, the Saudi General Authority for Statistics said that consumer prices rose an annual 6.1% in July from 0.5% in June.
The inflation quickened at the fastest pace since at least 2012 after the Kingdom of Saudi Arabia tripled its Value Added Tax (VAT).
The acceleration of consumer price inflation indicates that the scaling up of the VAT from 5% to 15% on July 1, had an overall influence on consumer prices throughout the Kingdom.
This was a part of the government’s measures to compensate for lower oil prices as the coronavirus pandemic and crude market turmoil cut deeply into state revenue.
In July 2020, most of the main expenditure categories witnessed higher prices as compared to the same month of the previous year but the rise of the CPI (Consumer Price Index) originated mainly from the increase in prices of Food and Beverages (+14.3%) and Transport (+7.3%).
Fuel and Gasoline showed price reductions of 17.1% and 15.5%, respectively, partly offsetting price increases in other categories of consumption.
“The pass-through from the VAT hike may be relatively more limited compared with when the tax was first introduced in 2018. Even so, we expect Saudi inflation to jump to 5.5-6.0% year on year this month and remain around this level for much of the next year” Jason TUVEY senior emerging markets economist at Capital Economics, said in a research note.
This article was edited using the data from the Arabianbusiness.com, Business-standard.com, Reuters.com, Stats.gov.sa, and English.alarabiya.net.