According To The Cpi, Prices Rose By 4.4% During The First Four Months Of 2022

In an article entitled "High inflation in Kuwait in 2022", the Economics Intelligence unit of the "Economist" magazine translates the latest Central Administration of Statistics data on the Consumer Price Index (CPI), which shows an average rise of 4.4 percent in prices during the first four months of 2022.

Kuwait's inflationary pressures will increase during 2022, according to a local Arabic daily, indicating that this figure is in line with their expectations.

The magazine explained that supply chain bottlenecks were the result of the new shutdowns in China in response to the Corona pandemic, as well as the global rise in material costs from the Russian invasion of Ukraine, which is expected to stem consumer price inflation through tighter monetary policy.

A report by Economist Intelligence stated that Kuwait has experienced an upward trend in consumer prices since 2021, and that this issue was exacerbated by the rise in world commodities prices following the war in Ukraine.

According to the consumer price index, oil prices increased 4.8 percent on an annual basis, contributing to an increase in the transportation sector.

Despite the fact that food price inflation, which makes up the second largest component of the consumer price index basket, fell to 9.1 percent in 2021 from a record high of 11.5 percent that previous year, it continued to be a significant inflation driver.

Kuwait, which imports about 95 percent of its food needs, remains vulnerable to fluctuating international prices of foodstuffs, and the recent sharp rise in these prices has led the government to form a committee on food security.

Furthermore, the temporary increase in rent prices during 2021 resulted from an imbalance in the local real estate market, while limited supply and speculation increased the price of housing. This contributed to higher inflation rates in 2021, due to an increase in the consumer price index caused by increases in housing prices.

In spite of the recovery in construction work, the unit expected that demand for housing would continue to outstrip supply, since lower oil prices will allow for an increase in capital investment.

According to this unit, expatriate workers' departure might reduce real estate demand and prices. Kuwait's Central Bank raised interest rates at the end of March by 25 basis points to 1.75 percent according to the Kuwait Economic Unit, which is expected to impact the housing segment negatively.

According to the sources, higher interest rates will strengthen the dollar and reduce the cost of imports since the dinar depends on a basket of currencies dominated by the dollar.

In 2024-2025, Economist Intelligence expects inflationary pressures in Kuwait to be increased by the expected implementation of value-added tax, continued reforms in the government price support system, and the impact of future value-added tax in the second half of the forecast period.

In 2023 to 2026, the inflation rate is expected to remain at an average of 2.2% as a result of the higher interest rates starting in 2022.

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