Research Briefing | Jun 27, 2022

Inflation heats up in GCC but is less troubling than elsewhere

Inflation heats up in GCC but is less troubling than elsewhereWe have raised our inflation forecast for the GCC to average 3.2% this year, up from our projection of 2.8% six months ago. However, the GCC’s rate of inflation will remain below that of most advanced and emerging markets, as we expect inflation to average 7.5% globally this year. Regional stocks have erased all of this year’s gains, reflecting concerns about inflation globally and, with much tighter policy on the way, gloomier growth and energy demand outlooks.

What you will learn:

  • In our view, GCC inflation will follow the global trajectory and begin to ease in H2.
  • GCC households have been insulated from sharp price increases by food and fuel price caps, more limited stimulus in the last two years that forestalled the build-up of domestic price pressures, and the strength of US dollar-pegged currencies, which have dampened import costs.
  • But with housing costs no longer a drag and firms increasingly passing rising costs onto the consumer (except in the UAE), inflationary headwinds will weigh on household consumption and the non-oil recovery into 2023.

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