Saudi Arabia is facing deflation for the first time in over a decade, here's what you should know

Prices have been sinking in Saudi Arabia, as the kingdom faces deflation for the first time in more than a decade.

For consumers, this means things are getting cheaper. But, it also signals the weakness of the Saudi economy. 

Here's a look at what you should know.

Prices have dropped 0.4 percent when compared to Jan. 2016. The decrease is sharp, having dropped 0.2 percent between December 2016 and last month.

Food and beverage prices dropped even more drastically than the overall average, by 4.2 percent. Much of the kingdom's food supplies are imported.

This is the first time prices have seen a decline in the kingdom since the early 2000s, according to Reuters.

Saudi Arabia's economy is dependent on oil and low oil prices have taken their toll. Riyadh's budget deficit reached a record high of $98 billion in 2015. This fell to $79 billion in 2016.

Oil sold at $30 per barrel at the beginning of 2016, but increased to hover around $50 by the end of the year. This is still significantly down from previous averages that were over $100 per barrel.

As a result, the kingdom introduced Vision 2030, a national transformation plan that aims to create jobs, implement taxes, cut subsidies and diversify the kingdom's economy. Officials have warned that if the plan wasn't followed, the kingdom would face bankruptcy within a few years.

In September, the kingdom announced a 20 percent pay cut for all ministers and a 15 percent pay cut for Shura Council members. It  also switched to the Gregorian Calendar in an effort to save 11 days of payments to public sector employees. Bonuses and other perks were also targeted by the reforms and sales taxes have been introduced.

More than two-thirds of Saudis work for the government, with the kingdom spending roughly 45 percent of its budget, or $128 billion, to pay their salaries in 2015.

The kingdom also sold $17.5 billion in debt in October. This was the largest-ever bond sale from an emerging market. The sale was hailed as a major success for the world’s top oil exporter as it attracted investor interest totaling $67 billion, nearly four times the amount of the sale.

For the first time since 1999, Saudi Arabia is forecast to fall into an economic recession in 2017.

The kingdom's oil sector growth will continue to slow as austerity measures are implemented, according to an analysis by BMI Research. The report predicts that the Saudi economy will contract by 0.2 percent in real terms next year. In 2016, the economy grew by just 0.8 percent.

Taxes will be implemented in Saudi Arabia, starting with a 50 percent tax on soft drinks and a 100 percent tax on tobacco products and energy drinks in the second quarter of this year. A value added tax will be implemented throughout the kingdom at the beginning of 2018.

The kingdom also plans to further raise fuel prices. Prices for visas to the kingdom have also increased.

According to a report by London-based Capital Economics, the Saudi economy looks to be bouncing back overall. 

"We think this period of deflation is likely to prove short-lived," Capital Economics said, according to Reuters.