Saudi inflation to persist in Q4-central bank

JEDDAH, Saudi Arabia, (Reuters) – Saudi Arabia’s central bank expects inflationary pressures in the biggest Arab economy to continue in the fourth quarter due to increased spending from the pilgrimage season, it said in a report on Tuesday.

Spending usually increases during the annual Haj pilgrimage season, which ended last week, as more than 2.8 million pilgrims visit Mecca and Medina.

“The available (information) indicates… the expectation of continued inflation pressures, especially in products and services, during the fourth quarter of 2011,” according to a report published on its website.

“As Haj season fell in the fourth quarter of 2011 that could lead to a rise in inflation pressures due to increased consumer spending,” it said.

Inflation in the top oil exporter had hovered below 5 percent for most of 2011 but had climbed to an eight-month high of 5.3 percent in September.

Analysts expected consumer prices to gain momentum this year after the government pledged early in 2011 to spend an estimated $130 billion, or nearly 30 percent of annual economic output, on housing, job creation and other measures to improve social welfare.

But Saudi central bank Governor Muhammad al-Jasser said in October that he was “not worried” about inflation levels and expected them to continue to decline.

A Reuters poll of analysts in September forecast average inflation of 5.1 percent for all of 2011, slightly down from 5.3 percent in 2010.