(Updates with economist comment in fourth paragraph.)
Oct. 16 (Bloomberg) -- Saudi Arabian inflation accelerated to 5.3 percent last month, its fastest pace since January, as the world’s biggest oil exporter increases spending on housing and jobs.
The inflation rate rose to 5.3 percent, the Saudi Press Agency reported today, compared with 4.8 percent in the previous month. The cost of living index increased 0.9 percent in September from August, the report said. Annual inflation in January was also 5.3 percent.
Saudi Arabia announced earlier this year about $130 billion in spending to create jobs and ward off the political unrest sweeping through other Middle Eastern countries. The government had already pledged a $384 billion, five-year development plan to build new houses and expand non-oil industries.
“We’ve expected this now given higher oil prices as well as the government stimulus package and overall recovery and growth in the economy,” said Liz Martins, a senior economist with HSBC Bank Middle East Ltd. She said the inflation rate is not expected to climb much higher so long as the U.S. dollar continues its recovery. The Saudi riyal is pegged to the US dollar at a rate of 3.75 riyals.
Central bank Governor Muhammad Al-Jasser cut his forecast for economic growth this year to 5 percent and said the inflation rate had begun to stabilize, Asharq Al-Awsat newspaper reported Sept. 28. The bank’s earlier forecast was for a 6 percent expansion. The central bank said in August that inflation may accelerate during the third quarter on higher consumer spending.
West Texas Intermediate crude oil has increased 5 percent over the last year, while Brent has gained 18 percent.
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