The stability in the Consumer Price Index is primarily attributed to a 7.1% increase in the housing, water, electricity, gas, and other fuels category. Within this segment, actual housing rents surged by 8.5%, with villa rental prices escalating by 11.2%. Given that this category constitutes approximately 25.5% of the CPI basket, its significant rise played a crucial role in maintaining the overall inflation rate.
Food and beverage prices experienced a modest uptick of 1.0%, driven largely by a 3.7% increase in meat and poultry costs. The personal goods and services sector saw a 3.9% rise, influenced by a substantial 26.7% hike in prices for jewelry, watches, and precious antiques. Additionally, the restaurants and hotels category recorded a 0.8% increase, primarily due to a 2.4% rise in accommodation services.
Conversely, certain sectors witnessed price declines. The furnishings and household equipment category decreased by 2.5%, influenced by a 4.4% drop in prices for furniture, carpets, and flooring. Clothing and footwear prices fell by 1.0%, mainly due to a 2.4% reduction in ready-made clothing costs. Transportation costs also declined by 1.5%, affected by a 2.4% decrease in vehicle purchase prices.
On a monthly basis, the CPI in February 2025 exhibited relative stability, rising by 0.2% compared to January 2025. This slight increase was primarily due to a 0.4% rise in the housing, water, electricity, gas, and other fuels category, driven by a 0.4% increase in actual housing rent prices. The personal goods and services category also recorded a 0.7% increase, influenced by a 5.5% rise in insurance prices. Other sectors, such as recreation and culture, clothing and footwear, transportation, and restaurants and hotels, experienced marginal increases ranging from 0.1% to 0.7%. In contrast, the food and beverage category saw a 0.2% decrease, while furnishings and household equipment, education, and communication categories experienced slight declines of 0.3%, 0.2%, and 0.1%, respectively.
The stability of Saudi Arabia's inflation rate at 2% aligns with the International Monetary Fund's projections, which anticipate the kingdom's inflation to remain stable at about 2% over the medium term. This consistency underscores the effectiveness of the nation's economic policies in maintaining price stability.
In November 2024, the Saudi government released its budget forecast, anticipating inflation to hold steady at 1.9% in 2025, up slightly from 1.7% in 2024. The World Bank projected a stable 2.3% inflation rate for the same period, below the Gulf Cooperation Council average. These forecasts reflect confidence in Saudi Arabia's economic strategies and its ability to manage inflationary pressures effectively.
The GCC region, including Saudi Arabia, has largely been shielded from the high inflation rates experienced globally. This resilience is partly due to the region's monetary policies and the pegging of local currencies to the U.S. dollar. In November 2024, most GCC central banks, including Saudi Arabia's, reduced key interest rates by 25 basis points, following the Federal Reserve's decision to lower U.S. rates. These rate cuts aimed to spur growth in credit-sensitive sectors such as real estate and domestic spending, enhancing resilience in the broader economy.
The Saudi Arabian Monetary Authority's decision to adjust interest rates in line with global trends reflects a proactive approach to maintaining economic stability. By aligning monetary policies with those of major economies, Saudi Arabia aims to balance domestic growth with external economic conditions, ensuring that inflation remains within manageable levels.
The kingdom's efforts to diversify its economy under the Vision 2030 initiative have also contributed to economic stability. By reducing dependence on oil revenues and promoting sectors such as tourism, entertainment, and technology, Saudi Arabia aims to create a more resilient economic structure capable of withstanding global economic fluctuations. This diversification strategy not only supports sustainable growth but also helps in mitigating inflationary pressures arising from external shocks.
In the context of global economic challenges, Saudi Arabia's stable inflation rate is noteworthy. While many countries grapple with rising inflation due to supply chain disruptions and geopolitical tensions, the kingdom's ability to maintain price stability highlights the effectiveness of its fiscal and monetary policies. This stability enhances investor confidence and positions Saudi Arabia as a favorable destination for foreign investment.