Inflation breaking our backbone

Sabria S. Jawhar

Saudi Gazette

THERE is a perception that Saudis are rolling in money as the price of a barrel of oil hovers around $130. Americans have cut their driving drastically as a gallon of gasoline sells for $4.50, while we Saudis continue driving our Escalades and Hummers without much care.

Well, yes, actually we are driving our big cars and paying relatively low prices for gasoline. And I don’t feel too guilty about it. But are we living in the lap of luxury and laughing all the way to the bank as the West sheds tears of frustration because they have to buy small cars? No we’re not.

There is something to be said that the Saudi government is using its oil wealth to build huge new cities and universities to guarantee our economic future with or without oil. But the average Saudi is hardly sitting pretty atop a huge pile of money.

Like elsewhere in the world, Saudis are suffering the same fate as an average American or British family. Inflation is out of control and is creating significant hardships among the poor and middle class.

This week the Ministry of Economy and Planning’s Central Department of Statistics announced that Saudi Arabia’s annual inflation climbed 10.6 percent in June, marking a 30-year high as food and housing costs increase.“We could be reaching some kind of plateau within three months but we don’t see a rampant inflation that is out of control,” said John Sfakianakis, chief economist at SABB bank, HSBC’s subsidiary in Saudi Arabia.

Well, maybe Sfakianakis doesn’t see rampant inflation, but there is enough anecdotal evidence to indicate that Saudis have been hit hard.The report notes that food and beverage costs increased 15.8 percent in June compared with a hike of 15.1 percent in May. Rents, fuel and water skyrocketed nearly 19 percent in June as well.

Monica Malik, chief economist at EFG-Hermes Holding SAE, Egypt’s investment bank, said that “Saudi inflation is still going to be rent and food-driven for the rest of the year. We expect some stabilization in food prices (in the future).”That is not much comfort to people trying to feed their families.

As the expression goes, when two elephants fight in the jungle, it’s the grass that is the first victim. Wall Street speculators are driving up the cost of oil and big mortgage banks in the US gave away risky loans creating a real estate collapse not seen since the Depression of the 1930s.

Now the chickens are coming home to roost as the US dollar weakens and inflation soars on a global level.Next time you go to the supermarket, check out the buying habits of your neighbors. Saudis, for better or for worse, reveled in leisure grocery shopping.

By that I mean they rarely used a calculator to keep track of costs, didn’t use shopping lists, and if they felt a little blue or bored, they took off for the supermarket or local mall for a little shopping to brighten their day.

Today, I see more and more couples with a calculator in their hands and making demands on clerks that products have a price tag attached or a label on the shelf. The lower class, always mindful of the value of a Saudi riyal, are much more careful with their grocery budget and spend more time in the market to ensure they get the best value for their money.

All of this, by Saudi society standards, is unusual if not somewhat disturbing.I’ve been abroad for a while, so the contrast from what I saw last year and now is rather startling. I understand the public sector salaries have been increased to compensate at least for some of the inflation, but private businesses have not necessarily followed.

And many upper class Saudis are still reeling under losses in the stock market. Many Saudis and expats are left to fend for themselves in a financial environment that does not look promising. Analysts can predict all they want about how inflation may level off, but prices are not likely to drop.

What I’ve seen since I returned to Saudi Arabia for my summer vacation is a general atmosphere of depression. A realization that the economic benefits we have enjoyed with relative low prices of goods, food and fuel have been chipped away to the point that our lifestyle is about to change in a way that will make putting food on the table more of a struggle.