Weekly Insights 20 Sep 2024: Low inflation rates in the GCC; non-oil exports are rising; Middle East tourism strongest globally

Weekly Insights 20 Sep 2024: Low inflation rates in the GCC; non-oil exports are rising; Middle East tourism strongest globally

1. Consumer & producer price inflation in Saudi Arabia increased in Aug

• Consumer price inflation in Saudi Arabia inched up to 1.58% yoy in Aug (Jul: 1.53%), with food prices increasing sharply (to 0.9% from 0.4% in Jul) while transport prices declined by 3.36% (Jul: -3.48%). Housing costs edged down in Aug (8.93% from 9.26%) as rental costs slowed, up by 10.69% (from Ju1’s 11.12% which was the highest on record since Jan 2013).
• CPI averaged 1.6% in Jan-Aug 2024 versus 2.7% in the same period a year ago, with all categories showing a decline except housing costs – which increased by an average 8.6% (vs 8.09% in Jan-Aug 2023).
• Wholesale prices in Saudi Arabia also increased, to 3.2% in Aug (Ju1: 3.1%, the lowest reading since Feb 2023), with costs of agriculture & fishery products rebounding (0.4% from -0.2%). Deflation continued in ores & minerals (-3.7% from -4.3%) and metal products, machinery & equipment (-0.13% from -0.81%).
• Till Aug 2024, average wholesale prices accelerated: clocking in 3.4% (vs Jan-Aug 2023: 0.5%), with the surge driven by “other transportable goods” (8.4% from 0.53%).
• These increases are in line with the responses from the PMI readings, which highlighted high input costs (via material costs, higher wages) and slight increases in output prices.

2. Oman’s consumer & producer prices remain relatively muted in Aug

• Inflation in Oman eased in Aug, slowing to 1% yoy (Jul: 1.5%), with food prices slowing sharply (3.3% from 4.6%) while furnishing costs fell (-0.6% from 0.3%) and transport costs plunged further (-2.8% from -1.7%).
• In the Jan-Aug period, average inflation edged lower (0.6% from 1.0%) with only 3 categories posting upticks including housing & utilities (0.5% from 0.2%) and miscellaneous goods & services (up 1.0% to 3.3%).
• Producer price index in Oman, calculated on a quarterly basis, rebounded in Q2 largely owing to the jump in mining & quarrying prices. With a weight of 55.57%, the mining & quarrying costs were up 5.3% (Q1: -1.4%) while costs of manufacturing (with a weightage of ) jumped 0.5% (from -2.6% in Q1). Multiple categories within manufacturing posted substantial increases including food & non-alcoholic beverages (2.5% from 0.1%) and transportable goods (1.1% from -4.69%).
• During the 8 months of the year, overall producer prices moved to 0.8% from deflation during the same period a year ago (-8.4%); manufacturing, transportable goods and metal products, machinery and equipment moved from double-digit negative readings to -1.1%, -1.8% and -0.6% respectively.

3. Oman’s exports and imports are robust in H1 2024; surplus narrows

• Oil and gas exports accounted for more than 60% of Oman’s overall exports in H1 2024, while non-oil exports share stood at a tad over 30%. Exports increased by 6.7% yoy to OMR 11.6bn (driven by oil exports: +5.3% yoy to OMR 7.2bn) while imports accelerated at a faster pace of 10.8% (to OMR 8.0bn). This narrowed trade surplus to OMR 3.65bn (vs OMR 3.74bn in H1 2023).
• Non-oil exports from Oman comprised mainly of metal products (OMR 1.5bn, up 21.5% yoy, and 12.9% share of overall exports) and chemicals & related products (OMR 521mn). Re-exports grew by 13.9% to OMR 867mn, with transport equipment accounting for close to 30% of total re-exports) followed by machinery & electrical equipment (21.7% of total re-exports)
• UAE was Oman’s largest non-oil trade partner: non-oil exports to the UAE grew by 8.9% yoy to OMR 457mn by Jun, while re-exports stood at OMR 338mn. UAE was also the largest exporter to Oman (OMR 1.9bn).
• The main import items were mineral products (OMR 2.3bn, close to 30% of overall imports) and machinery, electrical equipment, and sound recording devices (OMR 1.3bn).

4. Qatar inflation moderates in Jul; industrial production stayed weak

• Inflation in Qatar eased to 0.2% yoy in Jul (Jun: 1.0%), the lowest reading since Mar 2021.
• Prices of food and non-alcoholic beverages fell for the first time since Jun 2023, clocking in -0.7% in Jul (Jun: 0.1%). Prices declined further for housing & utilities (-3.8% from -3.1%) and transportation (-0.9% from -0.3%). Prices of some non-tradeables remain relatively high including recreation & culture (8.3% from 14.1%); restaurant & hotel costs rebounded in Jul (+2.1%) after declining for 12 consecutive months).
• Headline inflation moderated to 1.6% in Jan-Jul (from 3.6% a year ago), the highest upticks were seen in food (3.1% from 0.2%) and recreation & culture (13.2% from 12.0%); restaurants & hotels and transport categories saw prices plunge (-0.8% and -0.1% respectively from 1.4% and 1.7%)
• Industrial production in Qatar contracted for the 6th month in a row, down by 4% yoy in Jul. While the declines eased in manufacturing (-0.3% from -5.1%) and mining & quarrying (-5% from -8.3%), production grew in water supply (0.5% from -5.3%) and electricity & gas supply (8.2% from -5.3%). The latest PMI numbers indicated an increase in new orders, underscored by the strong demand for non-energy products which will support industrial production in the near-term. (Qatar’s PMI has been quite volatile post-World Cup, clocking in an average 50.7 in Q4 2023 and Q1 2024 before edging up to 53.8 in Q2.)

5. Middle East international tourist arrivals rose 26%in Jan-Jul 2024 vs pre-pandemic, continuing its robust performance

• The UNWTO reported in its latest World Tourism Barometer (issued Sep 2024) that an estimated 790mn tourists travelled internationally in Jan-Jul 2024, up 11% yoy and 4% less than in 2019.
• The Middle East was the strongest growing region in the 7 months to Jul, with arrivals at 26% higher than the 2019 levels. international arrivals in the Middle East exceeded pre-pandemic levels by 26%; Africa alsoexceeded, by 7%. While recovery was evident in Asia, the sub-region performance varied: South Asia recovered 92% of pre-pandemic levels while South-East Asia and North-East Asia lagged with recovery at 88% and 75% respectively. 
• Among the best performing destinations in Jan-Jul 2024 in terms of international tourist arrivals were Qatar (top, +147% vs 2019; with arrivals more than doubling), Saudi Arabia (+73%) and Bahrain (+45% through June) from the Middle East.
• Total export revenues from international tourism, including both receipts and passenger transport, surged to USD 1.8trn in 2023, almost similar to pre-pandemic levels in real terms (-1%). Receipts in the Middle East climbed 45% above 2019 levels.

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