DUBAI – Saudi Arabian inflation rose to 3.4% in 2020, lifted by the tripling of value-added tax last year as the kingdom sought to boost state revenues hit by the coronavirus crisis and lower oil prices, government data showed.
The main drivers were prices of food and beverages, which increased by 9%, and transport, up by 3.8%, the General Authority for Statistics said on Thursday.
Inflation spiked in the second half of last year due to the VAT hike to 15%. The rise followed a mild inflation rate in the first part of the year and a deflationary trend in 2019, when the annual rate was minus 2.1%.
The world’s largest oil exporter’s economy contracted sharply last year, but data suggests the rate of decline slowed in the third quarter data as some COVID-19 restrictions were lifted.
Business surveys in recent months showed a rebound in economic activity, partly due to pent up consumer demand, although economists have said the VAT hike has weighed on the pace of recovery.
(Reporting by Davide Barbuscia; editing by John Stonestreet) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: email@example.com))