Inflation In Saudi Arabia

inflation is defined as a long term rise in the general level of price for goods or service which caused by the devaluation of currency. The Inflationary problems arise when we experience unexpected inflation which is not totally associated by the rise of households incomes, but if the incomes do not increase as the price of goods increased the people purchasing power will effectively reduce and that may lead to stagnant economy. Moreover, excessive inflation can also effect badly on retirement savings as it reduces the purchasing power of the money that savers and investors have.

The two main types of inflation are:-

1- Demand Pull Inflation- this occurs when the economy grows quickly and the aggregate demand (AD) increases at a faster

The average value for Saudi Arabia during this period was the minimum percentage in 2000 was -1.1 % and a maximum of percentage in 2008 was 9.9%. Inflation in Saudi Arabia is usually calculated as the percentages change in the Consumer Price Index (CPI) from one year to the next. it represents the prices paid by the average urban consumer in each respective country. Inflation is Saudi Arabia has remained relatively high, at an average of 4.17% in the period from 2007 to 2013. The inflation problem caused by main divisions of living costs; for example, in the Food and Non-alcoholic Beverages division the average inflation across the same period was 6% while for Housing, Water, Electricity, Gas and Other Fuels the average annual inflation rate was 7.9%. In 2011 alone in the same category, inflation was 11.4%. macroeconomic perspective discussed the causes of inflation in Saudi Arabia by looking into different components of the economy.

* The GDP—Consumption, Government Spending, Investment and Net Exports— it describe the relationships that have led to inflation.

GROSS DOMISTIC

This created access demand on the sector, so that explain high inflation in the real estate .

NET EXPORT

Exports is Saudi Arabia are always greater than its imports; that because of the oil exports, which are the biggest part of the nation’s economy. Therefore, Saudi Arabia always has a trade surplus The affects of inflation

Inflation is not only a source of uncertainty, inefficiency and distortions, but also it obstruct decision-making and planning, and removes the incentive to save. If inflation is not contained in the initial stages, it can become firmly entrenched and would eventually undermine economic growth.

Solution to solve inflation

In order to solve inflation- regulate the transferring of foreign currency reserves by government . Also it can impose restrictions in the transfer of foreign currency reserves outside of the country. Also to solve the problem of inflation is to lift certain import controls. This will be able to lessen inflation because the depletion and reduction of the foreign currency reserves will be