Saudi Arabia’s inflation rate is projected to rise to 2 percent in 2025, marking an increase from the 1.5 percent recorded in 2024. This uptick, detailed in a recent report by the General Authority for Statistics (GASTAT), reflects evolving economic pressures within the Kingdom. The data provides key insights into consumer price trends and wholesale market dynamics, impacting both households and businesses.
The report, released this week, indicates that the increase in the Consumer Price Index (CPI) is primarily driven by rising costs in housing, water, electricity, gas, and other fuels. These developments are closely watched by the Saudi Central Bank as it calibrates monetary policy to maintain economic stability. Understanding these shifts in inflation is crucial for investors and policymakers alike.
Understanding the Drivers of Saudi Arabia’s Inflation
A significant contributor to the projected inflation increase is the 6.1 percent rise in the prices of housing, water, electricity, gas, and other fuels. Within this sector, residential rents experienced a substantial 8.2 percent increase, having the most pronounced effect on the overall annual inflation rate. This suggests a tightening housing market and increased demand for rental properties.
Sector-Specific Price Changes
The food and beverage sector also saw a notable increase, with prices rising by 1.1 percent. This was fueled by a 1.1 percent increase in food prices and a 1.8 percent rise in restaurant and accommodation service costs, particularly a 2.4 percent increase in accommodation service prices. These increases reflect broader global food price trends and growing domestic tourism.
Additionally, personal care, social protection, and other goods and services experienced a 5.1 percent price increase, largely due to an 18.6 percent surge in the cost of other personal belongings. Recreation, sports, and culture also contributed to the overall increase, with prices rising 2.5 percent, driven by a 5.8 percent increase in holiday package prices.
However, some sectors experienced price decreases. Furniture, household appliances, and routine home maintenance saw a 0.8 percent decline, while information and communication costs fell by 0.7 percent. A slight decrease was also observed in healthcare, with prices dropping 0.2 percent. These declines offer some offset to the inflationary pressures in other areas.
Wholesale Price Index Trends
The GASTAT data also revealed a 2 percent increase in the wholesale price index for 2025. This rise was primarily attributed to a 4 percent increase in the prices of transportable goods – excluding metal products, machinery, and equipment – and a 4.1 percent increase in agricultural and fishing products. These wholesale price increases are likely to eventually filter down to consumer prices.
Refined petroleum products saw a significant price increase of 8.2 percent, and furniture and other unclassified goods rose by 9.2 percent. Food, beverages, tobacco, and textiles also experienced a modest 0.2 percent increase, driven by a 1.5 percent rise in grain mill products and a 1.1 percent increase in leather goods. These trends highlight the impact of global commodity markets on the Saudi economy.
Meanwhile, agricultural and fishing product prices increased by 4.1 percent, with agricultural products rising 6 percent and fish and other fishing products increasing 2.1 percent. Metal products, machinery, and equipment saw a smaller increase of 0.1 percent, supported by increases in manufactured metal products and electrical machinery.
In contrast, the raw materials and minerals sector experienced a 1.2 percent decline, largely due to a drop in the prices of stones and sand. This suggests a potential slowdown in construction activity or increased supply of these materials. The Saudi economy is heavily reliant on its economic growth and diversification plans.
The report also indicates a growing focus on economic diversification within the Kingdom, as evidenced by shifts in sector performance. These changes are aligned with Saudi Vision 2030, which aims to reduce the nation’s reliance on oil revenue.
Looking ahead, GASTAT is expected to release quarterly inflation reports throughout 2025, providing more granular data on price movements. Monitoring these reports will be crucial for assessing the effectiveness of government policies aimed at managing inflation and supporting sustainable economic growth. The impact of global economic conditions and geopolitical events will also be key factors to watch in the coming months.
