Saudi Arabia's General Authority for Statistics revealed on Wednesday that the country's year-on-year consumer price index (CPI) for February 2020 rose to 1.2 percent — the highest it has been since December 2018 when it reached 2.2 percent. However, when looking at the CPI on a month-to-month basis, the prices only grew 0.3 percent.
The increase of price in food items and transport along with the decrease in most other items' due to a change in consumer spending caused by the COVID-19 outbreak are the main reasons behind the noticeable hike in the inflation rate, which stood at a mere 0.4 percent in January. "Food and Beverages" as well as "Transport" alone recorded a 3.4- and 3.7-percent increase in February, respectively.
"The impact of the coronavirus outbreak on prices started initially in February but it will be significantly more as social distancing increases," chief economist at Abu Dhabi Commercial Bank Monica Malik told Reuters.
On the other hand, the "Housing, Water, Electricity, Gas and Other Fuels" category reported an average price decline of 0.7-percent, aiding in the slow rise of the inflation rate.
During 2008, after the entire globe had fallen into recession, Saudi Arabia was not left unscathed. The kingdom at the time recorded its worst inflation rate (9.87 percent) in around three decades; in 1975 it had reported an immense 34.58-percent increase in inflation.
Contrary to popular belief, the kingdom was not impacted by oil but rather a drop in demand for credit. In fact, the oil sector recovered relatively quickly after having recorded an 80-percent decline in the second half of 2008. According to Jadwa Investment's 2010 report on the 2008 financial crisis, "at that time, the two main drivers of inflation were global food prices and local rents."
In an attempt to keep itself safe from another possible financial crisis brought on by the pandemic, Saudi Arabia has cut 50 billion riyals ($13.31 billion) from its yearly budget.
The cut itself totals less than 5 percent of the entire budget and will be achieved by slashing grants allocated to minor sectors with little to no social or economic impact.