Sunday, August 17, 2008

Reuters: Inflation is Relative for Inflation-Hit Saudis

We highlighted in February the growing inflation in the Middle East [Feb 26: Rising Inflation Creates Unease in the Middle East] and in fact pointed to its spread worldwide [Apr 10: NYT - Inflation Spanning Globe] & [May 18: Inflation Spreads Worldwide]

Here is an update to the Middle East situation specific to Saudi Arabia - with that said, keep in mind in some countries such as Abu Dhabi [Jul 12: Where is your Gas Money Going?] a starting salary for college graduates nets the equivalent of $180,000 USD salary so it's all relative when we speak of the "raging inflation". Abu Dhabi is a much smaller country so the wealth from petrodollars can be spread among a much smaller base [Feb 27: $2 Trillion of Petrodollars Needs a Home this Year] - not quite the same case in Saudi Arabia. But even in a "poorer" country like this I like to showcase what amount of wealth (and power - see Russia) our addiction to oil is creating for "2nd world" countries. [Jun 27: Global Millionaires - the Shift from West to East] Even more interesting is a trend I believe only grows with time - the gaping chasm of wealth distribution across the globe - i.e. other countries are becoming more and more "Americanized".
  • With inflation rising across the Gulf Arab region, Saudi Arabia's perennial problem of unequal distribution of wealth has never been so obvious.
  • While poor Saudis queue for hours to obtain water in the kingdom's second city Jeddah, others are able to take advantage of America's new-found disdain for gas-guzzling four-wheel-drives by snapping up imported cars.
  • Thousands of couples are cutting costs by forgoing individual weddings in favor of mass ceremonies carried out by a charity backed by Saudi princes. But the affluent are still going on holidays, albeit opting for cheaper stays in neighboring Arab countries rather than trips to Europe or Asia.
  • Surging oil prices have triggered a turnaround in Saudi Arabia's economic fortunes and a return to some of the big spending -- by wealthy individuals and the monarchy -- that characterized the 1970s and 1980s.
  • But the economic boom has also stoked prices for food and fuel, leading to discontent in a rapidly changing country where around two-thirds of the 17 million-strong local population are under 30, educated and outspoken and aware of events abroad. In June, inflation in the world's top oil exporter hit a 30-year high of 10.6 percent, mainly on increases in food and housing costs.
  • "Public sector workers don't understand why the government is not raising wages to match inflation; there is a disconnection between expectations and what the government delivers and so there is discontent," he said.
  • A January wage hike of 5 percent for government employees disappointed those Saudis who earn less than 10,000 riyals ($2,666) a month, especially after Gulf neighbors moved more quickly to raise wages by larger amounts.
  • Saudis earning less than that figure would still expect to employ a driver and at least one maid. They are not taxed and receive free health and education and other benefits.
  • "But I've noticed we don't buy as many things as we used to, like laptops. In every home, each person has to buy at least one a year, that's the usual demand. But not for us this year."
  • Saudis are careful about expressing public criticism lest it be taken for dissent. But in anonymous Web forums, and in private, those who really suffer ask where the money has gone.
  • "Saudi Arabia is about to enter an era where there is no middle class, you will either find extremely rich people or extremely poor people, unfortunately," read a comment on a popular business news portal, (sounds familiar)
  • The question of how many people live in poverty remains taboo in a kingdom fabled for its tremendous wealth. But half the population rents its home, and 10 billion riyals has been set aside for low-cost housing.
  • "We are passing through a very critical stage. You are talking about a state with more than a billion dollars every 24 hours. They can buy anyone," said a liberal reformer who was detained in 2004 and who also requested anonymity.
  • Anecdotal evidence suggests crime has risen in Saudi cities, with a sharp rise in the number of executions in 2007 to 143.
  • More than 7 million foreigners work in Saudi Arabia, mostly blue-collar workers from Asia. They have been among the hardest hit by rising prices, although analysts say there is no major movement of labor out of the kingdom.

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012