The impact of recent price hikes and value-added tax (VAT) will be felt most strongly by expat workers, according to a new report by Capital Economics.

While Saudi citizens will be compensated with increased salaries and, for civil servants and military servicemen, one-off bonuses, there are no such mitigating measures for non-nationals, said Middle East analyst at Capital Economics, Jason Tuvey.

There is an increased “expat levy” for employment in Saudi Arabia for the companies where the foreigners are more than the locals, which is now SR400 per month.

There is also an increased fee for their dependents at the rate of SR200 per dependent this year, SR300 in 2019 and SR400 in 2020. 

The report suggests that the price rises and VAT will come hand in hand with inflation, which could rise by more than 6% in 2018.

Petrol and electricity will be the main drivers of this. The price of fuel at the pump has risen by up to 127%, while electricity tariffs for the low-end consumption of most Saudi households have increased by 260%. VAT will add 2.5% to the inflation rate.

In 2017, the inflation rate in Saudi Arabia hovered around zero, began to rise around October last year but economists believe that it will fall again in 2019 to under 2%.

Tuvey was of the opinion that consumer spending was not likely to be strong this year, given the price rises and despite the government’s allowances.