ABU DHABI 23 April 2017: Affected by internal and external factors, the inflation rate in Arab countries may reach 9.8 per cent and 9.6 per cent in 2017 and 2018 respectively, the Arab Monetary Fund predicted in its latest report on the Arab Economic Outlook (AEO).
AMF’s AEO said that the year 2016 saw a rise in inflation rates in the Arab countries as a group to about 8.4 per cent, compared with about 6.6 per cent recorded during 2015.
”This increase reflected the effect of reforms adopted to rationalise subsidy systems, especially for fuel and energy products in most of the Arab countries, as well as the impact of measures that have been taken by some countries to rationalise imports of luxury goods due to of pressures on the exchange rates.
“The inflation rate in 2016 was also affected by the internal conditions in some countries and their impact on the supply of goods and services,” the report said.
Explaining internal and external factors that affect inflation in Arab countries, the AMF said, “Internally, the general price level will be impacted in some Arab countries by the continuation of reforms aiming at rationalising subsidy systems, the adoption of value-added taxes as well as the tendency towards imposing taxes on harmful goods.
“On the other hand, the expected improvement in the agricultural production will mitigate part of the inflationary pressures in some Arab countries.”
On external factors, it stated the inflation rates will be influenced by the expected increase in international oil prices in line with the agreement between the main oil exporting countries to adjust production as well as the expected increase in the dollar value against the other major currencies, which will reduce the value of imports in Arab countries adopting fixed exchange rate regimes against the dollar.
By Rajive Singh