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Saudi Arabia expats brace for five per cent inflation in 2018
| Published: | 27 Dec at 6 PM |
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Expats in Saudi may well benefit from the upcoming changes in the kingdom, but inflation may be the undesirable result.
Beginning with the introduction in the new year of VAT at five percent and including the new energy price reforms, inflation in 2018 is expected to soar to over five per cent. Tariffs due to be introduced on private education, charitable institutions, healthcare, agriculture and residential property are also expected to prove inflationary. At the present time, there’s effectively no inflation in Saudi Arabia, but the new reforms aren’t expected to damage the country’s economy.
A note from Jadwa Investment Bank states it expects economic growth to continue during 2018, supported both by oil and non-oil revenues. The GDP of the oil sector is expected to modestly increase as production rises after OPEC and non-OPEC states withdraw from production cuts. Stimulus packages in the expansionary budget will have positive effects on non-oil sector growth, according to the bank.
The budget is also expected to be a cushion for the economy against several forthcoming measures such as expat levies, dependency fee increases and energy price reforms. More Saudis are expected to get formal jobs, thus increasing consumer spending, and government spending efficiency is also to be improved. The government now has more leeway to increase borrowing up to a third of GDP, as stated in the recent budget.
Meanwhile, the UAE has banned the importation of egg and chicken products originating from Saudi Arabia due to an outbreak of bird flu (H5N8) in Riyadh. The ban was imposed after the emirate was put on notice by the World Organisation for Animal Health announced 14 infected birds had been found. As a result, 60,000 birds were culled. The World Health Organisation has no reported cases of human infection, resulting in a low risk warning being issued.
The UAE is the latest world region to be hit by unusual weather, with the thick fog covering the emirates since last Friday expected not to clear until tomorrow at the earliest. Flights have been disrupted and traffic conditions are very poor, with 54 accidents reported as well as one death and six serious injuries. By Friday, moderate winds off the sea will have cleared the remnants of the fog.
Beginning with the introduction in the new year of VAT at five percent and including the new energy price reforms, inflation in 2018 is expected to soar to over five per cent. Tariffs due to be introduced on private education, charitable institutions, healthcare, agriculture and residential property are also expected to prove inflationary. At the present time, there’s effectively no inflation in Saudi Arabia, but the new reforms aren’t expected to damage the country’s economy.
A note from Jadwa Investment Bank states it expects economic growth to continue during 2018, supported both by oil and non-oil revenues. The GDP of the oil sector is expected to modestly increase as production rises after OPEC and non-OPEC states withdraw from production cuts. Stimulus packages in the expansionary budget will have positive effects on non-oil sector growth, according to the bank.
The budget is also expected to be a cushion for the economy against several forthcoming measures such as expat levies, dependency fee increases and energy price reforms. More Saudis are expected to get formal jobs, thus increasing consumer spending, and government spending efficiency is also to be improved. The government now has more leeway to increase borrowing up to a third of GDP, as stated in the recent budget.
Meanwhile, the UAE has banned the importation of egg and chicken products originating from Saudi Arabia due to an outbreak of bird flu (H5N8) in Riyadh. The ban was imposed after the emirate was put on notice by the World Organisation for Animal Health announced 14 infected birds had been found. As a result, 60,000 birds were culled. The World Health Organisation has no reported cases of human infection, resulting in a low risk warning being issued.
The UAE is the latest world region to be hit by unusual weather, with the thick fog covering the emirates since last Friday expected not to clear until tomorrow at the earliest. Flights have been disrupted and traffic conditions are very poor, with 54 accidents reported as well as one death and six serious injuries. By Friday, moderate winds off the sea will have cleared the remnants of the fog.
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