Riyadh – Mubasher: Jadwa Investment said that government initiatives aimed at stimulating private sector activity are likely to have positive impact on aggregate demand, and therefore inflation.

The planned increase in household electricity prices by mid- 2017 should accelerate inflation to similar levels witnessed in early 2016, when energy prices were increased last, the report said.

The investment firm noted that the deflationary trend is mainly due to a higher base effect resulted from the rise in energy price applied in January 2016.

"Looking ahead, we expect inflation to remain subdued in the first six months of 2017, before another hike in household electricity prices pushes up inflation during the second half of 2017," Jadwa added.

The sharp slowdown in headline inflation was a reflection to the effects of the reform in energy prices seen back in January 2016.

Jadwa pinpointed that foodstuff prices, the largest weight in the CPI basket, remained in the negative territory for the sixth month in a row, both year-on-year and month-on-month terms.