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Saudi Arabia Struggles with Deflation: First Time in Decade

Images of Saudi Arabia that might come to mind are vast stretches of desert, camels and princes dressed in thobes (a loose, long-sleeved, ankle-length garment) and a Ghutrah (Saudi men's national headdress).

Others might immediately think of oil and the vast wealth that accompanies it.

But, most people would probably not think of deflation. Yet, that's what the nation is experiencing for the first time in a decade.

A Feb. 21 Yahoo Finance article elaborates. Here's an excerpt:

Consumer price deflation hit Saudi Arabia in January for the first time in over a decade, official data showed on Feb. 21, but plans for increased state revenues mean prices are unlikely to continue falling for more than a few months.

Prices fell 0.4 percent from a year earlier last month, their first drop since the early 2000s, and decreased 0.2 percent from December, the Central Department of Statistics said.

The falls were partly due to the weakness of the Saudi economy, where low oil prices have slashed the government's export revenues and forced it to cut spending.

Last year's economic slowdown pushed retailers and many other companies into discounting their products.

Food and beverage prices sank 4.2 percent from a year earlier in January partly because of a strong U.S. dollar, to which the Saudi riyal is pegged. The kingdom imports much of its basic foods.

A third factor was the government's decision to raise prices of domestic fuel and utilities around the end of 2015 in order to cut its budget deficit. Those hikes dropped out of calculations in January this year, causing a sudden decrease of inflation.

You can read the entire article by following the link below:
http://finance.yahoo.com/news/saudi-arabia-sees-first-deflation-153525797.html

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