RIYADH: The Saudi Central Bank (SAMA) expected 5.4 percent inflation rate for the first quarter of 2021, the same rate of the last quarter of 2020, according to Al Arabiya.
This comes due to the continuing impacts of raising value-added tax (VAT) last July from 5 percent to 15 percent.
Tobacco prices recorded the highest increase of any item in the fourth quarter of 2020, at a rate of 13.5 percent, followed by the prices of food and beverages, and telecommunications.
In addition, the Institute of International Finance (IIF) said in a report issued on Monday that Saudi Arabia is moving steadily on the path towards economic recovery due in part to an increase of investment capital inflows.
In a report, the IIF explained that preliminary official data showed a contraction in oil gross domestic product (GDP) in the Kingdom, in the context of oil production cuts and a decline in real non-oil GDP amounting to 7.2 percent, a decrease less severe than in many other G20 countries due to the Kingdom’s relatively small services sector and youth rate.
According to the report, capital flows of non-resident foreigners are expected to increase to about $47 billion this year.
It also stated that the Saudi banking system continues to be flexible, supported by capital positions, proper primary liquidity and response by SAMA, revealing that some of the challenges of profitability in the low interest rate environment may affect the ability of banks to significantly expand private sector credit by reducing spending.
