Inflation in Saudi Arabia is predicted to continue to fall during 2010, driven by a continuing slowdown in lending and consumer confidence, a new report said on Wednesday. Although the Kingdom's rate increased slightly in December to 4.3 percent, Business Monitor International said (quoted by Arabian Business) it was “not convinced” that the disinflation story was yet over. “We are forecasting an end-year rate of 3 percent in 2010, but an average rate of 2.4 percent, allowing for some further month-on-month deflation in 2010,” BMI's report said. It said it prediction was founded on “our view that bank lending will remain slow, and consumers cautious”. BMI added that a non-negligible risk that oil prices could fall back this year could also weigh on liquidity and consumer confidence, as well as bringing overall commodity prices down. “This would likely be accompanied by a stronger dollar, which would be a double blow for inflationary pressures. Indeed, this trend was already starting to suggest itself at the time of writing (in early February),” the report said. Inflation in Saudi Arabia, the largest economy in the Arab world, showed to an average of 5.06 percent last year, official figures showed late last month. The global crisis cut inflation rates across the Gulf Arab region from 2008 record highs, with some countries such as the UAE and Qatar experiencing falling prices. Saudi inflation hit a record high of 11.1 percent in July 2008.
