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7 Years Of Negative Inflation In 3 Decades

7 Years Of Negative Inflation In 3 Decades┬áRepeated inflation phenomenon of passive “decline in goods and services prices,” in the Saudi market, seven years during the previous three decades, “1988 to 2016”, after inflation record “contraction” in January by -0.4 per cent for the first time since the adjusted base year to 2007.

According to The Guaranteed Money System analysis and reporting unit in the “Economic Daily” was based on a General Authority of Statistics data, focused the seven years that the Saudi market has seen a negative inflation aka Deflation “falling prices” in the nineties, “from 1990 until 2001,” accompanied by record deficits in the budgets of Saudi Arabia in conjunction with that Gulf war and its aftermath.

Negative Inflation
Negative Inflation

However, the Saudi economy during the same period, “12 years”, has recorded a growth in nine years, while the contracted “negative growth” in just a three-year, which means that the price deflation in any state that does not necessarily lead to an economic downturn, even if accompanied by budget deficits.

The analysis revealed that, in spite of the Deflation in January, but the commodities and services in Saudi Arabia remain high by 36.5 per cent since adjusted the base year to 2007, reaching the record for the cost of living in January 2017 level of 136.5 points, compared to the level 100 points in 2007.
Although caused by the negative inflation in January, prices of “Food and beverages” and “transportation” and “restaurants and hotels” are still high rates of 42.3 per cent and 20.4 per cent and 24.7 per cent respectively, compared to the base year 2007.

The analysis excluded the continuing negative inflation in Saudi Arabia until the end of this year, due to four main factors, the first being the record government spending, which was adopted in the 2017 budget of about 890 billion riyals, in addition to the orientation of the state to support the private sector, estimated at 200 billion riyals.

Second, the state is moving to impose selective taxes through April of this year, and VAT early next year, in addition to the third factor, which directed the state to raise energy prices gradually to reach the world price, which will necessarily lead to the lifting of goods and services and rising inflation, by extension, the prices.

In addition, the fourth factor, which the Saudi government lift the tariffs on some food commodities, including dairy and poultry products, since the beginning of this year, which is not necessarily raise food commodities, which was the main factor in the deflation rate in January.

The gradual raising energy prices will raise energy prices, which in turn will lead to the lifting of transport prices that were inflated second group influential in the transformation of the rate to the negative trend in January.

Years of negative inflation

The negative inflation registered in Saudi Arabia years, 1990 by -1.0 percent, “accompanied by a deficit of 85 billion riyals and economic growth of 15.2 percent.”
Then in 1992, inflation was -0.9 percent, “coincided with a deficit of 85 billion riyals and economic growth of 4 per cent,” In 1997, inflation was -0.3 percent, “coincided with the deficit of 16 billion riyals economic growth of 1.1 percent.”
The 1998 scored inflation -0.3 per cent. “Coincided with the deficit of 48 billion riyals and economic growth of 2.9 percent,” Inflation in 1999 about -2.1 per cent. “Coincided with the deficit of 36 billion riyals, an economic contraction of -3.8 per cent.”

Inflation in 2000 a negative growth rate of -1.3 per cent. “Coincided with a surplus of 23 billion riyals and economic growth by 5.6 percent.”
Finally in 2001 the rate of inflation stood at -1.3 percent, “coincided with a deficit of about three billion riyals economic contraction of 1.2 per cent.”
The inflation rate has been recorded in January 2017 a negative growth rate of -0.4 per cent compared to the same period last year, and increased by 0.2- percent compared to December 2016.
According to the analysis, this is the first time that a negative inflation in Saudi Arabia recorded since adjusted the base year to 2017, noted that the negative inflation means low prices and not only that the prices of goods and services rose at a slower pace.

The analysis showed that the negative inflation was due to the decline in the price index of “Food and beverages 4.2 per cent because of the food, which declined by 4.6 per cent, as the benchmark for a transportation fell 3.1 percent, as well as hotels and restaurants by 1.1 per cent.

As a result, the decline in food prices in Saudi Arabia as a result of the global decline significantly, in addition to a decline in purchasing power in the country, while the transport index fell due to the end effect of raising energy prices, which decides the end of 2015, and came into force early in 2016.

Although caused by the negative inflation in January, prices of “Food and beverages” and “transportation” and “restaurants and hotels” are still high rates of 42.3 per cent and 20.4 per cent and 24.7 per cent respectively, compared to the base year 2007.
The rate of inflation has risen to 3.5 per cent during 2016, compared to 2.2 per cent in 2015, the highest since 2013 when it was 3.5 percent, according to an analysis of “economic.”

What does it mean “record” and “inflation”?

The CFD Society System index of statistical indicators and a statistical tool, is used to measure the relative change in the particular phenomenon both on the level of prices, or measuring quantities, or change in value, compared with a certain basis may be a certain time or a certain geographical place.
According to official statistics used in Saudi Arabia that is now the base year, 2007, after it had been before 1999. With “inflation” is the increase or decrease in the index of cost of living between the period of time and other rate.

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