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Oman’s inflation falls to lowest level in two years

23 May 2023 By GULAM ALI KHAN

Muscat – Oman’s annual inflation rate in April dropped to its lowest level in two years, thanks to slower increase in food prices and stability in utilities, fuel, rent and transportation bills.

The inflation rate, as measured by the sultanate’s Consumer Price Index (CPI), dropped to 1.1 per cent in April 2023 from 1.6 per cent in March and 1.9 per cent in February this year, according to data released by the National Centre for Statistics and Information (NCSI).

Oman’s annual inflation has been consistently declining in the past few months due to easing global inflation and government measures that capped prices of fuel and essential commodities.

Consumer price inflation for food items, which have nearly 24 per cent weightage in Oman’s CPI, rose at a slow pace of 2.7 per cent in April, as opposed to 4.1 per cent in March. The 19-month low food inflation is mainly attributed to a sharp nine per cent drop in vegetable prices in April compared to a year ago.

Among food items, prices of cooking oil and fats rose 7.4 per cent year-on-year in April, but bread and cereal prices grew at a lower rate of 3.3 per cent. Meat prices recorded a slow increase of 0.9 per cent, while prices of fish and seafood products jumped 10.3 per cent in April year-on-year. Consumer prices for fruits increased 1.9 per cent.

On the other hand, cost of housing, water, electricity, gas and other fuels remained stable in April this year compared to April 2022. Prices in the transportation group, which has a percentage weight of more than 19 in the CPI, edged down by 0.15 per cent in April compared to the same a year ago.

Lowest inflation in GCC

The International Monetary Fund (IMF) expects Oman’s annual inflation to further decelerate this year, thanks to subsidies, price caps on certain products and a strengthening US dollar to which the Omani rial is pegged.

Oman is expected to record an average inflation of 1.9 per cent for 2023, the lowest inflation in the GCC, according to the IMF. The sultanate witnessed the second-lowest average inflation rate among GCC countries in 2022 at 2.8 per cent, following Saudi Arabia, which registered an inflation rate of just 2.5 per cent last year.

In its latest Regional Economic Outlook Report, IMF projects inflation in the GCC countries will further decrease in the next two years, averaging 2.9 per cent in 2023 and 2.3 per cent in 2024.

‘Lower inflation in GCC countries is mainly attributed to governmental interventions such as price caps on certain products, subsidies on key products or utilities, and strengthening of the US dollar, to which all GCC countries have pegged their currencies, except for Kuwait, which has linked its currency to a basket of currencies including the US dollar,’ the IMF said.

According to a report from Kuwait-based Kamco Investment, the combination of persistent high oil and gas prices and interest rate hikes by GCC central banks, largely in unison with the US Federal Reserve rate increases, has been another key factor that kept inflation rates significantly lower in Oman and GCC countries.

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