Lakhasly

Global inflation fell to 5.8% in 2024 (from 6.7% in 2023), due to tighter monetary policies, lower food and energy prices, and improved supply chains. Saudi Arabia's CPI increased by 1.7% in 2024, with a 1.9% YoY rise in Q4 2024, primarily driven by a 9.2% increase in housing, water, electricity, gas, and fuel costs. Other significant Q4 2024 CPI changes included a 2.4% rise in miscellaneous goods and services, and a 2.9% decrease in furnishings. The WPI showed a 1.6% YoY increase in Q4 2024. Inflation in Saudi Arabia's major trading partners varied, ranging from a 0.2% YoY increase in China to a 5.6% increase in India. Stable domestic inflation is projected for Q1 2025, balancing slowing global inflation and rising housing rents and domestic demand. The World Bank forecasts deflationary pressure on most commodities in 2025, except metals and raw materials.

Executive Summary
Global inflation declined to 5.8% in 2024 compared to 6.7% in 2023, with that being attributed to the
tightening of monetary policies, the decline in food and energy prices, and the continuous improvement
in supply chains.
Domestically, the average Consumer Price Index (CPI) recorded a rise of 1.7% in 2024 compared to 2023.
The CPI also recorded a YoY rise of 1.9% in Q4 2024, mainly due to an increase in the segment of housing,
water, electricity, gas, and other fuels, which was driven by the rise in housing rents.
Housing, water, electricity, gas and other fuels recorded the highest YoY inflation rate, rising by 9.2% in
Q4 2024. Miscellaneous goods and services came second by 2.4%, followed by restaurants and hotels by
1.4%, education by 1.1%, and food and beverages by 0.4%. In contrast, furnishings, household equipment
and maintenance posted the highest YoY decrease, declining by 2.9% in Q4 2024.
The Wholesale Price Index (WPI) recorded a YoY increase of 1.6% in Q4 2024.
Domestic inflation is expected to remain stable in Q1 2025 , driven by a balance of several factors,
including slowing global inflation as a result of lower commodity prices (food and energy), in addition
to rising housing rents and higher domestic demand in general, reflecting improvements in employment
rates among Saudis.
Global Inflation
Global inflation is slowing with significant variation across countries, as inflation in emerging and developing
economies stood at 7.9% in 2024 compared to 8.1% in the same period of 2023. In contrast, inflation in ad-
vanced economies reached 2.6% in 2024 compared to 4.6% in 2023. As a result, global inflation declined to
5.8% in 2024 compared to 6.7% in 2023. The decline in global inflation is attributed to tightening monetary
policies, the decline in food and energy prices, and the continuous improvement in supply chains. The Interna-
tional Monetary Fund (IMF) projects global inflation to continue declining to 4.3% in 2025 and to 3.6% in 2026,
thus drawing closer to levels targeted by central banks (Chart 1).
2-Inflation in Saudi Arabia
2-1 Consumer Price Index (CPI)
The average Consumer Price Index (CPI) recorded a rise of 1.7% in 2024 compared to 2023. CPI also registered
a YoY rise of 1.9% and a QoQ rise of 0.6% in Q4 2024, mainly due to an increase of 9.2% in housing, water,
electricity, gas and other fuels (the largest segment of the CPI), which was affected by the rise in housing rents.
This rise may be attributed to the growing domestic demand resulting from population growth in major cities,
and the expansion in tourism and recreation activities, alongside slower housing supply, which contributed to
widening the gap between supply and demand in the rental housing market (Table 1 and Chart 2).

1-1 Developments in Q4 2024
In Q4 2024, housing, water, electricity, gas and other fuels recorded the highest YoY inflation rate of 9.2%, followed
by miscellaneous goods and services with 2.4%. Restaurants and hotels came next with a YoY increase of 1.4%, fol-
lowed by education with 1.1%, and food and beverages came last with a YoY increase of 0.4%.
Fourth Quarter 2024
In contrast, furnishings, household equipment and maintenance posted the highest YoY decrease, declining by 2.9%
in Q4 2024. Transportation came next at 2.7%, followed by clothing and footwear at 2.4%, recreation and culture at
1.6%, communications at 1.5%, tobacco at 1.4%, and health at 1.2% (Table 1).
2-1-2 Effect of Main Expenditure Categories on the CPI
Inflation rates are affected by the changes in the CPI’s various segments. Ranked by their proportional effect on
the CPI in Q4 2024, housing, water, electricity, gas and other fuels came first with 64.3%, the same rate recorded
in Q4 2023. Transportation came second with 9.8% compared to 2.7% in Q4 2023, followed by miscellaneous
goods and services with 8.3% compared to 3.0%; furnishings, household equipment and maintenance with 5.4%
compared to 6.8%; clothing and footwear with 2.7% compared to 5.5%; communications with 2.3% compared
to 4.8%; restaurants and hotels with 2.2% compared to 4.1%; food and beverages with 2.0% compared to 7.0%;
recreation and culture with 1.3% compared to 0.9%; education with 0.9% compared to 0.8%; health with 0.5%
compared to 0.1%; and lastly tobacco with 0.2% compared to 0.0% in Q4 2023.
The total effect of the three main expenditure categories (housing, water, electricity, gas and other fuels; food
and beverages; and transport) on the general inflation rate stood at around 76.1% in Q4 2024 in comparison to
74.0% in Q4 2023 (Chart 5

The WPI in Q4 2024 recorded a YoY increase of 1.6% and a QoQ increase of 0.3% (Chart 6). A breakdown of the
WPI by product category shows that transportable goods (except metal products machinery and equipment)
recorded the highest YoY increase of about 3.5% in Q4 2024. Agriculture and fishery products came next with
2.4%, followed by metal products, machinery and equipment with 0.3%. On the other hand, ores and minerals
posted the highest YoY decrease of 2.8% in Q4 2024, followed by food products, beverages, tobacco and textiles
with 0.2% (Table 2 and Chart 6).

3- Inflation Rates in Saudi Arabia’s Largest Exporters
Looking at the general levels of the CPI for Saudi Arabia’s largest exporters, and based on Q4 2024 data, the
inflation rate in China, Saudi Arabia’s largest exporter, registered a YoY rise of 0.2% but a QoQ decline of
0.3%. In addition, the inflation rate in the United States recorded a YoY rise of 2.7% and a QoQ increase of
0.2% in Q4 2024. The inflation rate in the UAE (Dubai specifically) registered a YoY rise of 2.8% and a QoQ
rise of 0.8%. In India, the inflation rate registered a YoY rise of 5.6% and a QoQ rise of 1.5%. In Japan, the
inflation rate recorded a YoY rise of 2.9% and a QoQ rise of 1.1%. Moreover, the inflation rate in South Korea
recorded a YoY rise of 1.6% and a QoQ rise of 0.2% compared to Q3 2024. Inflation in Germany also recorded
a YoY rise of 2.3% and a QoQ rise of 0.4% (Table 3).

4- Inflation Projections for Q1 2025
Domestic inflation is expected to remain stable in Q1 2025 , driven by a balance of several factors, including
slowing global inflation as a result of lower commodity prices (food and energy), in addition to rising
housing rents and higher domestic demand in general, reflecting improvements in employment rates
among Saudis.
On the other hand, the World Bank’s projections for the Primary Commodity Price Index (October 2024) indicate
deflationary pressures on most commodities in 2025. The projections show a decline in the prices of beverages
by 9.2%, energy by 6.2%, agriculture by 4.2%, food by 4.0%, and fertilizers by 1.4%. In contrast, prices of metals
are projected to rise by 0.8% and raw materials by 0.4% (Table 4).
Table 4: World Bank Commodity Price Index (2010=100)