Saudi inflation to slump, risks lie to the downside

Saudi inflation is set to fall sharply in July as last year’s VAT hike falls out of the annual comparison. While there will be some upwards inflation pressure from the re-opening of the economy and global supply shortages, a weak recovery in demand is likely to keep the headline rate subdued over the next 18 months. If anything, a potential VAT cut means the risks to the near-term inflation outlook lie on the downside.