Saudi Inflation Still Fueled by VAT Hike, Central Bank Says

Saudi inflation is expected to rise during the first quarter compared to the same period the previous year due to the residual effect of an increase in value-added tax but should be little changed on the previous quarter, the kingdom’s central bank said on Monday.

Consumer prices rose an annual 5.6% in the last three months of 2020.

Saudi Inflation Still Fueled by VAT Hike, Central Bank Says

The world’s largest crude exporter tripled VAT to 15% in July as it endured twin economic shocks from the spread of the coronavirus pandemic and oil market turmoil. Officials later said the decision might be reviewed once the crisis is over.

The VAT rise was among a series of measures taken by Saudi Arabia last year to limit the economic damage caused by the decline in crude oil prices.

Inflation is expected to stabilize on an annual basis in the second half of 2021 as the base effects of the VAT increase wear off.

©2021 Bloomberg L.P.

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