Raise In Kuwaiti's Salaries To Tackle Rising Inflation

Due to an increase in liquidity and demand, direct government increases in salaries and wages will play a part in boosting inflation pressure in Kuwait, according to a specialist economic analysis released . Inflation rates are predicted to rise to 3.5-4 percent in the first half of this year, according to research released by Kuwait Finance House's Research Department.

It was also highlighted that inflation rates rose to 3.8 percent in February as a result of price increases in most consumer goods, particularly food. Food costs are anticipated to rise further, but residential rates stayed steady in February due to increased supply, according to the report.

According to Kuwait's Central Statistical Office (CSO), consumer price index (CPI)-based inflation increased by 3.8 percent y-o-y in February 2012, up from 3.5 percent y-o-y in January 2012. This increase was mostly due to rising food costs. According to the study "Inflation crept up to 0.2 percent on a monthly basis on February 20,”

Kuwait's total inflation, according to KFH, is similar to that of other Gulf Cooperation Council (GCC) countries. In February 2012, for example, CPI inflation in Bahrain and Saudi Arabia increased by 0.4 percent y-o-y and 5.4 percent y-o-y, respectively, due to increasing food and beverage costs. For internal consumption, the GCC imports the majority of its food.

The food sector (which accounts for 18.3% of Kuwait's CPI basket) increased by 8.6% y-o-y in February 2012, up from 8.1 percent y-o-y the previous month. Kuwait's growing food costs are in line with the global trend of rising food prices.

Other components of the CPI, according to the research, also saw significant price increases due to high domestic demand in Kuwait.

In February 2012, prices in the clothing and footwear section (which accounts for 8.9% of the CPI basket) increased by 4.9 percent year over year (January 2012: 3.2 percent t y-o-y). "We expect Kuwait's inflation to remain high in 1H12, ranging from 3.5 percent to 4.0 percent y-o-y, due to rising global fuel and food prices. Nonetheless, we estimate inflation to moderate to 3.0%-3.50% y-o-y in the second half of 2012, thanks to the government's large subsidy scheme, which will prevent greater inflation in the future. Oil-related subsidies, in particular (which are included in Kuwait's yearly state budget spending), may lower the cost of transportation and power, and hence the cost of products and services."

Comments Post Comment

Leave a Comment

Submit