Saudi Arabia's consumer price index jumped to 6.1 percent in July compared to a year ago, as a result of a three-fold increase in value-added tax.
According to Reuters, the inflation rate in June was 0.5 percent, the lowest annual increase since January, before the value-added tax increased to 15 percent from Five percent as of July 1.
The General Authority for Statistics attributed the annual increase in inflation to an increase in prices for most categories. Food recorded the largest contribution by 14.6%, followed by transportation, at 7.3%.
Jason Tuvey, Chief Emerging Markets Economist at Capital Economics, said in a research note the impact of the VAT increase may be relatively limited compared to the introduction of the tax for the first time in 2018. However, We expect the inflation rate in Saudi Arabia to jump to between 5.5 and 6 percent on an annual basis this month, and to remain near this level for most of next year.
Saudi Arabia, the largest oil exporter in the world, announced in May a three-fold increase in value-added tax in an effort to boost its public finances, which were affected by the double shock of the Coronavirus pandemic and low oil prices .
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