With the ongoing rebound in economic activity, a question that emerges is whether inflation will increase again as it did in 2007–08 when the annual increase in consumer prices peaked at 11.1 percent in July 2008. Many of the drivers of inflation then are also present now, including higher food prices, depreciation of the nominal effective exchange rate, expansion of credit, and rising government spending.
However, the increases in these various drivers of inflation are at present generally smaller than they were in 2008. The one area where the pressure is greater now is fiscal spending, which is projected to increase by 24 percent in 2011 compared to 12 percent in 2008.
Still, a large part of this increase is capital injections to the Real Estate Development Fund and to the Saudi Credit and Saving Bank that are unlikely to be fully utilized this year.
No comments:
Post a Comment