As the economic life regains normalcy after the lifting of the Kingdom-wide lockdown in Saudi Arabia, estimates predict an anticipated return of inflation for the second half of 2020. This will be caused by COVID-19 economic pressures, the shrunk commercial activity, and scaled-down consumerism.
According to estimates disclosed by economic research, the return of economic activity will lead to higher demand and an increase in prices—this will be supported by the application of a value-added tax adjusted from 5% to 15% that is meant to strengthen the financial position of the country's budget.
According to a report prepared by researchers Raja Assad Khan and Nouf al-Sharif at the Saudi Jadwa Investment group, wholesale and retail sectors, restaurants and hotels have recorded a decline in growth in the first few months of 2020. This is referred to as the limiting of entertainment events because of the COVID-19 preventative measures and the temporary shutdown of shopping centers, cafes, and restaurants.
The report assumed a gradual recovery of activities in the third quarter of 2020, as the economic effects of the virus subside globally. Supporting measures in the Kingdom are also expected to help increase the income available for spending among Saudi families, which contributes to some consumption growth.
More so, the report pointed out that as a result of global and local developments associated with the coronavirus, there will be changes in inflation estimates for the current year 2020.
It is expected that the prices of a number of subgroups will witness pressures due to the slowdown of activity during Q1 and Q2 of this year.
This especially affects the prices of restaurants and hotels.
As for the second half of 2020, the Jadwa Investment group’s researchers predicted an increase in prices of many economic subgroups, especially foods and beverages, restaurants, hotels, and entertainment.
