Saudi economy not yet overheating

A combination of rising government spending, rapid and accelerating credit growth, and a rise in headline inflation has led some commentators to warn that the Saudi economy is overheating. Looking ahead, we think this is certainly a risk. However, for now at least, such fears don’t appear to be justified. Our own measure of core inflation, which strips out volatile food and energy prices, suggests that underlying price pressures are subdued by historical standards.