It's a free run for inflation in GCC

Inflation in the GCC region is set to rise further in the absence of effective policy tools to prevent it. However, potential sovereign credit ramifications - mainly fiscal and socio-political - are modest, being outweighed by the impact of continued high oil prices on public finances and sovereign balance sheets. Inflation is currently at its highest rate for 30 years in the region, running at double digits everywhere in the GCC but Bahrain, where the rise in price level is a more modest five per cent. As in the seventies, some of the region's increased oil wealth is feeding through into higher prices, and with policy tools limited, inflation will rise further before it starts to fall. Exchange rates The region's increased oil wealth warrants an increase in real exchange rates, which can come either though a revaluation of... [read full story]