Reuters/Dubai
Kuwait’s annual inflation eased to an 11-month low of 4.6% in July and edged up only slightly from the month before on higher food and transport prices, data showed on Monday, and analysts said they expect price pressures to stay muted. Inflation in the Gulf, the world’s top oil-exporting region, is expected to creep higher this year on robust global commodity prices, a weak dollar and increased government spending following political turmoil across the Arab world. In Kuwait, inflation had been hovering above 5% since reaching almost a two-year high of 6% in December 2010, though it subsided to 5.0% in June. On the month, consumer price growth slowed to 0.1% in July from 0.2% the previous month, data from the Gulf Arab country’s Central Statistics Office showed. “The July reading confirms a very benign inflationary situation, with prices essentially unchanged compared with June,” said Liz Martins, senior Mena economist at HSBC in Dubai. “The August number could come in higher, thanks to the Ramadan effect, but the underlying picture is of very low level price growth,” she said. Food prices usually rise during the holy month of Ramadan, which ended in August, as families enjoy more elaborate evening meals after fasting during the daylight hours. Kuwait has one of the highest annual inflation rates in the Gulf, second only to Saudi’s 4.9% in July, although price growth remains well below a record high of 11.6% seen during an oil-fuelled boom in August 2008. Analysts polled by Reuters in June expected average inflation in the world’s No 6 crude exporter to reach 5.1% in 2011 after 4.0% last year. In July, food costs, which account for 18% of Kuwait consumer expenses, rose by 0.2% on a monthly basis after a 0.6% drop in the previous month, the data also showed. Transport and communication prices rose 0.1% month-on-month, cooling down from a 1.0% jump in June. Housing costs, which make up 27% of the basket, were unchanged for the fourth month in a row in July. “There is significant oversupply in housing in both the UAE and Qatar that is helping subdue inflation. But in Kuwait they don’t have that kind of oversupply in the housing market,” said Shady Shaher, senior economist at Standard Chartered in Dubai. Kuwait’s central bank governor was quoted in June as saying interest rates were at a suitable level, and a dinar peg to a basket of currencies was helping to curb inflation, mostly driven by rising import costs. Slowing global economic growth and sovereign debt problems in the eurozone are affecting bigger economies like Italy and Spain, while emerging markets are also struggling to contain inflation. “The main risk for Kuwait would be an exogenous factor which would be a double-dip recession that would subdue demand for oil,” Shaher said. The $131bn economy of Kuwait, which abandoned its dollar peg in 2007 to rein in soaring inflation, is seen growing by 4.4% this year helped by robust crude prices and increased government spending after an estimated 3.0% growth in 2010.