Kuwait’s average inflation climbed to a three-year high of 4.8 percent in 2011, in line with analysts’ forecasts, data showed, but price pressures are expected to subside this year.
Consumer price growth in the OPEC member, which was spared the unrest sweeping the Middle East and North Africa last year apart from some small-scale demonstrations, reached 4.0 percent in 2010.
Kuwait’s 2011 inflation rate is the second-highest in the Gulf Arab oil-exporting region, just below 4.9 percent for Saudi Arabia.
However, inflation in Kuwait, home to around 2.7 million people, decelerated last year, slowing to a 19-month low of 3.1 percent in December from a 6.0 percent peak seen in December 2010, with analysts expecting it to fall further.
“Right now there are no significant inflationary pressures in Kuwait,” said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.
“Global inflationary factors are not there. We have seen a significant decline in global food prices between February and December. In addition, the dollar has been quite strong.”
“If we look at money and credit growth, they are also both very subdued so we don’t see inflation on the horizon,” he said.
Bank lending to the private sector grew by a mere 2.6 percent year-on-year in December, while money supply growth slowed to a four-month low of 8.5 percent.
On the month, consumer prices in Kuwait, which pegs its dinar to a dollar dominated currency basket, edged higher by 0.5 percent, the fastest rise in three months, the data from the country’s Central Statistics Office showed.
Food prices, which account for 18 percent of consumer expenses, soared by 1.1 percent month-on-month, rebounding sharply from a 0.1 percent rise in November.
Housing costs, which make up for over a quarter of the basket, increased by 0.8 percent month-on-month in December after remaining flat in the previous two months.
Analysts have expected prices in the world’s No. 6 crude exporter to go up last year helped by a rise in global commodity costs as well as the government’s social handouts.
Last January, the government announced plans to spend nearly $5 billion, or almost 4 percent of its gross domestic product, on cash grants and free food rations for its citizens.
A Reuters poll in December forecast average inflation of 4.8 percent in 2011 and 4.5 percent in 2012.
“One thing that could stimulate price pressures in Kuwait is the development plan which they have, but it depends on how aggressively they pursue that,” Gokkent said. “But I don’t see any significant inflationary pressures at this juncture.”
Parliament cleared a $110 billion development plan in February 2010, aiming to diversify away from oil and boost the private sector, but little remains spent so far due to political clashes, which led to two government resignations last year.
Kuwait, one of the richest countries in the world with 2011 per capita income of over $40,700 estimated by the IMF, plans to hold a parliamentary election in February following the latest government resignation in November.