Food and fuel costs are increasingly weakening buying power across the Arab world, causing prices to increase. As consumers begin to spend heavily on large purchases, some analysts predict inflation in many countries.

A rise in consumer prices in the US and Europe may be bad news for Middle Eastern countries as the cost of imports rises. Lebanon and Syria, are already suffering from currency collapses that have exacerbated inflationary pressures.

According to Monica Malik, chief economist at Abu Dhabi Commercial Bank, “We see a rise in inflationary pressure in the GCC over the coming months due to higher fuel and food prices.”

The global rollout of vaccines and the relaxation of restrictions in some major economies are encouraging consumers to spend freely. According to Bank of America, this is already beginning to show in increasing credit card spending.

Wednesday's meeting of Federal Reserve officials fears rising inflation in the world's largest economy. They prepare for possible economic growth of 6.2 percent this year.

As global food prices soared to their highest level earlier this month, the UAE said it was considering price restrictions on certain foods such as chicken and milk.

Though overall inflation in Saudi Arabia eased to 5.2 percent in February, food and beverage prices remained high, with an annual rise of 11.2 percent, according to data by the country's statistics body. Other Gulf States are showing signs of price rises, with Oman being the next target of attention as it prepares to enact a value-added tax next month.

Over the last year, consumers have paid more for many food products as manufacturers and grocery chains raised profit margins because of increasing demand during the pandemic. Due to increasing market demand, regional food producers such as Saudi Arabia's Savola have increased their margins last year. Inflationary pressures are starting to ease in the Gulf States, but there is no such relief in other countries such as Lebanon and Syria.

“Inflation is beginning from a relatively low level in most GCC countries, with several doing an excess supply in housing,” Malik said. “In Saudi Arabia, the inflation rate is expected to fall sharply in the second half of the year as the effect of the VAT hike is removed from the annual data. With the launch of VAT in April, Oman, on the other hand, could see a strong increase in inflation.”

Syria increased fuel prices in the government-controlled territory by more than half this week, as the Syrian pound dropped to new lows.

“Many Syrians and companies used to hold accounts in Lebanon in US dollars, but they lost access to them in autumn 2019 as Lebanon's financial crisis worsened. Many factors are contributing to the current situation, including a lack of economic development, high unemployment rates, rapid currency depreciation, a lack of foreign-exchange reserves, and the COVID-19 pandemic, says, Monika Tothova, an economist at the UN's Food and Agriculture Organization (FAO).

In 2020, Syria's Central Bureau of Statistics announced an average inflation rate of 200 percent. According to the FAO, 12.4 million people (60% of the total population) are now “food insecure.” as compared to 2019.

Prices are increasing in neighboring areas of Lebanon, where the Lebanese pound has reached new lows against the dollar this week.

“In the coming months, as the Central Bank runs out of foreign exchange reserves, the planned elimination of the subsidized exchange rate provision for importing food, essential drugs, and fuel will further raise the price of basic goods,” said Tothova of the FAO. “When coupled with lack of economic development and job prospects, the livelihoods of poor Lebanese and refugee families will be harmed.”