In Saudi Arabia, the people rushed to buy goods from imported fruit juices to cars ahead of a sharp rise in VAT on July 1introduced to boost state revenues amid its worst-ever economic decline.
Saudi Arabia announced the VAT increase and suspension of a cost of living allowance in May.
The tripling of VAT to 15 % comes against a backdrop of lower consumer spending and an easing of inflation due to a three-month coronavirus lockdown.
Najem ALOTAIBE, a car dealer in Riyadh said: “Demand has been very weak but people are now actively buying ahead of the VAT so there is a bit of demand”.
A worker in a gold shop in Riyadh reported also an increase in demand in the last two weeks.
The inflation eased to approximately 1 percent due to low demand for non-food items and reduced fuel prices, but some analysts expect it to reach more than 6 % year-on-year in July due to the VAT increase.
The import tariffs increased in June to contain a ballooning fiscal deficit, which the International Monetary Fund projects at more than 12 % of the GDP from 4.5 % last year.
Arqaam Capital said that these steps will reduce the overall deficit by 4.5 % to 6 % of the GDP, but may dampen economic recovery.
Gold investors worldwide have stepped up purchases in recent weeks as fears of a second wave of the coronavirus in some large economies encourage purchases of both physical gold and exchange-traded funds that are focused on the precious metal.
Gold bullion has risen more than 1 % this week, with prices at a nearly eight-year high of more than $1.779 on Wednesday. It has returned 22 % in dollar terms in the year to the end of March.
“Gold has always been topical for investors in the Middle East,” said Alessio CIRILLO, sales director at Invesco EMEA.
“Most investors buy gold as a hedge against inflation and high economic uncertainty, with some investors looking for asset appreciation. Globally, gold exchange-traded funds are recording record inflows as investors sought out liquid investment products to gain exposure to gold”.
This article was edited using the data from the Aljazeera.com, Arabnews.com, and, Reuters.com.