The Riyadh-based investment management firm attributed the lower forecast to the decline in prices within key sectors such as clothing, footwear, and transportation, which have effectively countered the inflationary pressures stemming from the housing market. This aligns with global trends, where easing demand and improved supply chains have contributed to a reduction in price pressures.
However, the housing market remains a notable factor driving inflation, especially within the ‘rentals for housing’ segment, which continues to experience upward pressure. Despite this, the overall economic environment in Saudi Arabia remains resilient, supported by the strong growth in the non-oil sector, which has been a significant contributor to the Kingdom's economic diversification efforts.
Jadwa Investment’s revision comes amidst broader economic developments in the Gulf Cooperation Council (GCC) region. The banking sector, for instance, has seen varied performances across different countries, with Saudi banks recording a 3.1% increase in outstanding credit facilities, reflecting strong lending activity. However, this was somewhat offset by a slight decline in customer deposits, particularly at Saudi National Bank. Despite these challenges, the Saudi banking sector remains robust, bolstered by a generally favorable economic environment.
The revision in the inflation forecast underscores the effectiveness of Saudi Arabia’s economic policies aimed at maintaining price stability while fostering growth in non-oil sectors. As the Kingdom continues to pursue its Vision 2030 goals, the moderation in inflation is expected to support sustained economic expansion, particularly as the non-oil sector continues to drive growth.
This latest forecast also positions Saudi Arabia favorably compared to other GCC countries, where economic conditions and financial performance vary significantly. While Kuwait’s banking sector has emerged as a strong performer with substantial increases in net interest income, other nations like Qatar have faced challenges, including a notable decline in net interest income, highlighting the diverse economic landscape within the region.
As Saudi Arabia continues to navigate the complexities of global economic trends, the focus on strengthening the non-oil sector remains a cornerstone of its economic strategy, with the latest inflation forecast signaling positive outcomes for the Kingdom's broader economic objectives.