Kuwait – Economic & Strategic Report- Inflation rate as measured by the percentage change in the Consumer Price Index followed an increasing trend since 2003 and up to the end of 2006, increasing from 1.6% to 6.3%, thus reporting a CAGR of 4.4%. Historically, it is worth noting that the inflation rate shot up in 2004 to 3.3% compared to 1.6% in 2003. The jump in the inflation rate came on the back of a number of factors namely raising the prices of oil products, raising the General Sales Tax (GST) to 16%, and imposing the GST on tobacco products and liquors. Adding to this, the exchange rate appreciation of foreign currencies against the US dollar contributed to the increase of the prices of imported goods.
Entering the year 2007, CPI inflation declined slightly to 5.4% as compared with 6.3% reported by the end of 2006. The lower inflation rate reported during 2007 was mainly influenced by the housing and other goods and services categories that reported increasing prices by 2% and 2.6% respectively by the end of 2007. Such levels are to be compared with the highest reported price increases of 5.6% and 5.5% reported for 2006.
CPI Inflation
Source: Central Bank of Jordan
However, it is important to note that among different CPI categories the food items continued to report the highest price increases of 9.3% by the end of 2007. Over years, this category had the largest weight within the General Price Index accounting for 39.7%. Clothing and footwear category followed, reporting 6.3% price increase to stand at 102.7 points up from 96.6 points reported during 2006.
Consumer Price Index
Weight 2003 2004 2005 2006 2007 `Mar 07 `Mar 08
Food Items 39.7 102.6 107.3 112.8 121.2 132.5 132.2 153.9
Clothing & Footwear 4.9 96.7 94.4 94.0 96.6 102.7 99.0 106.6
Housing 26.4 101.7 103.5 105.7 111.6 113.8 113.3 129.8
Other goods & services 29.0 100.8 105.4 108.4 114.4 117.4 116.6 129.3
Consumer Price Index 100.0 101.6 105.0 108.7 115.5 121.7 121.0 138.1
CPI Inflation 1.6% 3.3% 3.5% 6.3% 5.4% 14.1%
Source: Central Bank of Jordan
Entering the year 2008, affected by the ongoing increasing price levels all over the world especially for food products as well as skyrocketing oil prices as well as the tumbling US$, the general price level in Jordan witnessed a sharp increase by 14.1% by the end of 1Q08 as compared to 1Q07. The increase was supported by higher price levels registered within all categories. Food items reported the highest Q-o-Q increase of 16.4% to stand at 153.9 points. Housing followed with 14.6% increase to stand at 129.8 points, the highest level since 2003. Finally, other goods and services category reported 10.9% increase to stand at 129.3 points.
Moving forward, the latest available data from CBJ revealed that Jordan’s inflation stood at 12.7% by the end of May 2008 as compared to inflation level of 6.7% reported for the same period last year. This came on the back of 15.5% jump in food prices and 44.3% increase in oil and electricity costs. The liberalization of fuel prices has caused costs to rise towards market levels. Finally, another domestic inflationary factor to be mentioned, Jordan has experienced an increasing influx of Iraqis over the past five years thus increasing demand and consequently prices especially for housing.
