Gulf Cooperation Counci inflation remains stable amid global economic volatility

Inflation across the Gulf Cooperation Council (GCC) countries remained largely contained in the first quarter of 2025, despite ongoing global trade disruptions and inflationary concerns in other regions. According to the latest GCC Inflation Update by Kamco Invest, only Saudi Arabia and the United Arab Emirates recorded annual inflation rates exceeding 2% as of March 2025, reinforcing the region’s relative price stability.

The report highlights that while global inflation pressures are easing—supported by stabilizing energy prices, supply chains, and diplomatic breakthroughs in trade—the GCC’s subdued inflation is further anchored by currency pegs to the US dollar and government subsidies in essential sectors like food, housing, and energy.

GCC vs. Global Trends

Compared to broader trends across the Middle East and North Africa (MENA), where average inflation remains significantly higher, the GCC bloc is expected to maintain its disinflationary trajectory through 2025. However, Kamco Invest warns that protectionist trade policies—particularly recently introduced US tariffs—pose risks that could reintroduce upward pressure on prices, particularly in import-dependent economies.

In the United States, inflation eased slightly to 2.3% in April 2025, aided by postponed tariffs and declining service sector price growth. The Eurozone recorded steady inflation at 2.2%, but core inflation rose to 2.7%, indicating continued pressure in goods and services. A similar pattern is visible in the GCC, where inflation data reflects stable price levels but sectoral variations remain.

Country-Specific Highlights
• Kuwait reported an annual inflation rate of 2.3% in April 2025. Key drivers included a 4.6% rise in food and a 4.9% increase in services and miscellaneous goods. Transport costs fell 1.1% year-on-year, helping to moderate overall inflation. Monthly inflation growth was a modest 0.1%.
• Saudi Arabia saw inflation rise to 2.3%, primarily driven by an 8.1% increase in housing-related expenses, notably apartment rents, which jumped nearly 12% year-on-year. Meanwhile, prices for furniture, clothing, and transportation declined.
• United Arab Emirates (Dubai) recorded inflation at 2.3% in April, down from 2.8% in March. The housing group saw a sharp 7% increase, while transport prices declined by 7.6% year-on-year. The IMF projects UAE inflation to average 2.1% in 2025.
• Qatar reported one of the lowest inflation rates at just 0.3% year-on-year in March 2025. Price declines in housing and food offset increases in communication and education. The monthly inflation rate declined by 0.8%.
• Bahrain experienced near-zero inflation at 0.1% in March, making it the lowest among GCC peers. Price drops in housing, recreation, and food were only partially offset by rising communications costs. The IMF expects Bahrain’s inflation to average just 1.0% in 2025.
• Oman recorded 0.5% inflation in March 2025, with notable declines in food prices, especially vegetables and seafood. On a monthly basis, Oman’s CPI fell by 0.4%, supported by ongoing fiscal discipline and rising non-oil exports.

Outlook and Policy Trends

The report underscores that while inflation is a key driver of monetary policy, recent trade tensions could disrupt global expectations. Although both the US Federal Reserve and the European Central Bank had initiated rate cuts in early 2025 in response to softening inflation, uncertainty around global tariffs could delay further easing. While the Fed has kept interest rates steady at 4.25–4.5%, the ECB reduced its rates in April to stimulate demand in a sluggish Eurozone economy.

In the context of food prices, the FAO Food Price Index rose by 1.0% year-on-year in April, though it remains substantially below 2022 peaks. A decline in palm oil prices, due to seasonal factors and increased exports from Southeast Asia, played a key role in moderating global food price pressures.

Regional Inflation Forecasts

Kamco Invest projects that inflation across the GCC will average 1.9% in 2025, consistent with 2024 levels. This compares favorably with the broader Arab world, where inflation is forecasted to drop from 11.4% in 2024 to 7.7% in 2025. Within the GCC, Bahrain, Qatar, and Oman are expected to maintain the lowest inflation rates, ranging from 1.0% to 1.5%.

Conclusion

The report concludes that while inflation in the GCC remains under control for now, external factors—particularly trade frictions and potential shifts in energy prices—will need close monitoring. Policymakers are expected to maintain a cautious stance, balancing the need for economic stimulus with long-term price stability objectives. For now, GCC economies continue to benefit from their relative insulation from global inflationary shocks, a trend that could prove vital amid an increasingly uncertain international environment.