Fears of inflation loom amid economic recovery: Oman

Even as the Sultanate of Oman has seen an economic rebound in the backdrop of the current oil prices, there is fear that the surge may drive inflation higher.

The country’s annual inflation rate which is based on the consumer price index (CPI) has increased to 3.56 per cent even before the acceleration in the prices of the crude in November 2021.

Although imported inflation remains a major determinant of inflation in the Sultanate of Oman, domestic factors also play some role in conditioning inflationary conditions. An increase in inflation rate was expected as a result of value-added tax (VAT) last year coupled with rising commodities prices globally in the recent months.

On the other hand, Russian war in Ukraine carries huge risks for a world economy that’s yet to fully recover from the pandemic shock.

While addressing the Majlis Ash’shura last week, Dr Said bin Mohammed al Saqri, Minister of Economy, also confirmed that the rise in the inflation was due to the high



domestic demand for goods and services resulting from economic growth, high oil prices, the continuation of the impact of the local value-added tax and the rise in international prices of goods.


Inflation conditions in the Sultanate of Oman are influenced by both domestic and global factors.


“High dependence on import of goods and services along with rial’s peg with dollar and open capital account accords dominant role to global factors in the domestic inflation”, points out Abdullah bin Salim al Lawati, a financial expert with a leading bank.


According to Fitch Ratings’ latest ‘20/20 Vision’ chart pack, the pick-up in global inflation has been widespread and persistent and has shown few signs of having peaked.


“CPI inflation has increased in virtually every Fitch 20 country in the past three months and is now elevated relative to pre-pandemic rates and inflation targets in many of the major economies”, the global rating agency said.


“High fuel prices will lead to a further rise in cost of logistics and crude oil-linked raw materials, and that may necessitate more price hikes”, said Abdullah.


Source: https://www.zawya.com/en/markets/commodities/fears-of-inflation-loom-amid-economic-recovery-oman-wr4i0i1g


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