Oman Records Lowest Inflation Growth Among GCC Countries

Oman, 17 May, 2024 :  The Sultanate of Oman has experienced deflationary pressures recently, with consumer prices showing a year-on-year index decline twice within the last five months, according to a new report by Kamco Invest.

Among the six GCC countries, Oman reported the lowest average year-on-year inflation growth in March 2024 at 0.2%, compared to a -3.1% growth in March 2023. The index reached its lowest level in the last twelve months in February 2024.

Oman's marginal inflation growth was primarily driven by key CPI indices, such as the Food and Non-Alcoholic index, which saw a 3.3% year-on-year increase, and the Tobacco index, which grew by 2.4% year-on-year. Specifically, the prices of fruits increased by 0.7%, milk, cheese, and eggs by 3.9%, sugar, jam, honey, and sweets by 1.7%, oils and fats by 2%, bread and cereals by 1.2%, other food items by 3.6%, vegetables by 16.2%, meat by 2.3%, and fish by 2.8%.

Conversely, the CPI growth was tempered by decreases in other key indices. The transportation index fell by -4.6%, the restaurants and hotels index by 0.1%, and the furniture, fixtures, household equipment, and regular home maintenance index by 0.3%.

GCC Inflation Trajectory

Inflation in the GCC countries remained subdued in the first quarter of 2024 due to fluctuating global inflationary pressures influenced by a resilient global economy and ongoing geopolitical tensions. This environment has allowed central banks worldwide to halt rate increases.

Dubai saw the largest inflation increase in the GCC in March 2024, with a 3.3% year-on-year rise, compared to 4.3% in March 2023. Kuwait reported a 3% inflation growth in March 2024, while Saudi Arabia, Bahrain, and Qatar each reported inflation growth of less than 2%.

The IMF projects that inflation in the MENA region will remain at 11.2% in 2024, dropping to 8.6% by 2025. For the GCC region, the IMF expects inflation to stay at 2.2% in 2023 and 2024, with a slight decline to 2.1% in 2025.

Despite expectations of rate cuts due to globally coordinated monetary tightening, such cuts have not materialized due to insufficient progress on inflation. In March 2024, US inflation increased to 3.5% year-on-year, driven by higher petrol and housing costs, causing the Federal Reserve to maintain its benchmark short-term borrowing rate at 5.25% to 5.5%.

Additionally, a strong US Dollar is exacerbating inflationary pressures in some emerging and developing countries by increasing import costs, which in turn raises the overall cost of goods and services and hampers economic growth.

Source : www.zawya.com