DUBAI: Saudi Arabian consumer prices fell 1.9 percent year-on-year in April for the fourth month in a row but were unchanged from March, data from the General Authority for Statistics showed.
The annual declines in the consumer price index are partly a consequence of a base effect that raised prices last year after the introduction in January 2018, of a 5pc value-added tax (VAT), economists have said.
The annual fall in the CPI index, however, narrowed from March when the index had dropped 2.1 percent.
Some economists see the narrowing of deflation as a sign that Saudi Arabia is having some success in boosting its non-oil sector, while global oil prices have remained under pressure in recent years.
"The further easing of deflation in Saudi Arabia in April suggests that stronger activity in the non-oil sector at the start of this year is (finally) feeding through to a pick-up in price pressures," said Jason Tuvey, senior emerging markets economist at Capital Economics in a note.
Economists still expect deflation in 2019, after prices rose throughout 2018 following the introduction of the VAT, which was imposed to boost non-oil revenue in response to a long-term drop in oil prices.
Capital Economics expect Saudi CPI to fall 1.3 percent in 2019, while Abu Dhabi Commercial Bank's projects the CPI index to decline 0.9 percent this year.
"The big picture remains that the unwinding impact of tax and administered price hikes implemented in early 2018, has revealed the weakness of underlying inflation in the kingdom," Tuvey said.
After contracting in 2017, the economy grew 2.2 percent last year, but is forecast to grow more modestly this year.
The International Monetary Fund projects GDP growth of 1.9 percent, buoyed by an expansion of the non-oil economy as the government steps up spending.
The central bank chief said in February, when asked if he expected deflation this year, that he expected consumer demand and real estate loans would stave it off.
Credit grew in the first quarter by more than 3 percent, its fastest pace in more than two years, fuelled by a jump in mortgages and in loans to small- and medium-sized enterprises.
Tuesday's data showed the sub-index for housing, water, electricity, gas and fuel prices down 7.8 percent from a year earlier.
The sub-index had fallen 8.1 percent in March.
Prices for food and drinks, however, rose 1 percent and prices for education rose 1.3 percent.
This week, the Saudi government imposed taxes on electronic cigarettes and sugary drinks, extending similar taxes introduced in 2017.
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