[Oman-L] Inflation in Oman

[Joachim Duester]

Gulf Times, 16 August 2007 (extracts)

Annual inflation in Oman accelerated to 5.9% in June,
the highest in at least 2-1/2 years, as food costs and
rents jumped, official data showed.

The consumer price index rose to 110.3 points compared
with 104.2 points in the year-earlier, according to
data published on the Ministry of National Economy
website. Inflation was 4.3% in May.

The cost of food, beverages and tobacco, which account
for around 30% of the index, rose 11.1% in June,
compared with 9.1% in the previous month.

Oman, which pegs its rial to the dollar, relies
heavily on imported food and has been hit by rising
prices as the US dollar declined this year against
major currencies, said Monica Malik, an economist at
EFG-Hermes investment bank in Dubai.

The dollar hit a record low against the euro last
month.

“High food import prices have to do with dollar
weakness globally. This has put pressure on Oman,”
Malik said.

Oman has repeatedly ruled out revaluing the rial. The
decline in the dollar is “a passing phase,” Oman’s
acting central bank governor Mohammed Nasser
al-Jahadhmy told Reuters in July.

Rents, which have a weight of about 15% on the index,
climbed 9.5% in June, compared with 6.6% in May, the
data showed. “Rent is also an increasing driver of
inflation as the country has its investment drive,”
Malik said.

Oman’s $ 35.3bn economy may expand 6.5% this year, the
second-fastest pace in the last six years, according
to HSBC Holdings.

In the first quarter, Oman’s gross domestic product at
current prices grew 4.8%, ministry data showed. Money
supply, measured by M2, also jumped 30.9% in the year
to June to 5.11bn rials.