Saudi Arabia Sees Inflation Slowing as Government Boosts Spending on Homes

Saudi Arabia, the biggest Arab economy, is likely to see inflation slow in the medium- to long- term as government spending helps provide more homes, the Saudi Arabian Monetary Agency said today.

King Abdullah bin Abdulaziz Al Saud’s decision to build 500,000 homes and boost the cap on loans at the Mortgage Development Fund to 500,000 riyals ($133,330) will increase the number of private residences owned by Saudis and ease prices, SAMA said in a report on its website today. Food prices are likely to moderate in the second quarter in tandem with a drop in worldwide food costs, the report said.

The kingdom, which depends on oil for 86 percent of its revenue, announced increases in government spending in March as protests calling for more job opportunities and democracy engulfed the Middle East. The package included $67 billion on housing and funds for the military and religious groups that backed the government’s ban on domestic protests, and followed a $36 billion handout announced on Feb. 23.

Inflation in the kingdom accelerated to 4.8 percent in April, compared with 4.7 percent in the previous month, the Central Department of Statistics said May 14. Inflation is forecast at 6 percent this year, the International Monetary Fund said on April 27.

To contact the reporter on this story: Vivian Salama in Abu Dhabi at vsalama@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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