Saudi inflation slows in June before VAT increase

Credit: REUTERS/AHMED YOSRI

Saudi Arabia's consumer price index rose 0.5% in May from a year earlier, the smallest annual increase since January, official data showed on Wednesday.

DUBAI, July 15 (Reuters) - Saudi Arabia's consumer price index rose 0.5% in May from a year earlier, the smallest annual increase since January, official data showed on Wednesday.

Food prices, which went up 6.9% year-on-year, were the main driver for the increase in the overall inflation rate, the General Authority for Statistics said.

Saudi Arabia has ordered a tripling of value-added tax to 15%, starting this month, as it seeks to boost state revenues battered by low oil prices and the coronavirus pandemic.

"The inflation picture will take a turn for the worse this month after the VAT rate was tripled from 5% to 15% on 1st July," said Jason Tuvey, senior emerging markets economist at Capital Economics.

"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," he said in a research note.

(Reporting by Davide Barbuscia, editing by Larry King)

((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))

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