[Oman-L] Oman inflation surges to 12.4 per cent

[Joachim Duester]

Oman inflation surges to 12.4pc   
Source: Reuters, 17 June 2008

Inflation in Oman accelerated to a record 12.4 per cent in April as soaring global food prices and rents intensify price pressures across the world's biggest oil-exporting region.

Food and beverage costs — which account for almost a third of the consumer price index — jumped 21.6 per cent in the year to April 30, the Omani Ministry of National Economy said on its web site yesterday.

Rents also underpinned the index's 11th straight monthly rise, surging 16.2 per cent in April.

Oman's consumer price index hit 122.1 points on April 30 compared with 108.6 points a year earlier, the data showed. Prices rose 1.2 per cent over March.

Inflation is accelerating across the Gulf Arab region, where most countries, including Oman, peg their currencies to the ailing dollar, which is driving up import costs.

But currency weakness is only part of the problem, accounting for about a fifth of inflation guided largely by high global commodity prices, Oman's central bank chief, Hamood Sangour al-Zadjali, said in February.

Prices for cereals jumped 36.7 per cent and milk and milk products 30.4 per cent in April, the data showed.

"What happens next depends very much on global food prices and the U.S. dollar," said Monica Malik, a regional economist at EFG-Hermes investment bank.

"Inflation in Oman and the wider Gulf will remain elevated going forward as strong economic growth increases demand, particularly for housing," she said.

Zadjali has repeatedly said Oman is committed to keeping a dollar peg that has helped it attract foreign investments.

But forward rates show investors betting the Oman rial could rise 2.7 per cent in a year. Inflation probably hit a 20-year peak of 11.4 per cent last year in the UAE, according to a Reuters poll in May.