Suffering is relative for inflation-hit Saudis

By Andrew Hammond

RIYADH (Reuters) - With inflation rising across the Gulf Arab region, Saudi Arabia's perennial problem of unequal distribution of wealth has never been so obvious.

While poor Saudis queue for hours to obtain water in the kingdom's second city Jeddah, others are able to take advantage of America's new-found disdain for gas-guzzling four-wheel-drives by snapping up imported cars.

Thousands of couples are cutting costs by forgoing individual weddings in favor of mass ceremonies carried out by a charity backed by Saudi princes. But the affluent are still going on holidays, albeit opting for cheaper stays in neighboring Arab countries rather than trips to Europe or Asia.

Surging oil prices have triggered a turnaround in Saudi Arabia's economic fortunes and a return to some of the big spending -- by wealthy individuals and the monarchy -- that characterized the 1970s and 1980s.

But the economic boom has also stoked prices for food and fuel, leading to discontent in a rapidly changing country where around two-thirds of the 17 million-strong local population are under 30, educated and outspoken and aware of events abroad.

This has put the royal Al Saud family -- which runs the U.S. ally along with clerics who administer Islamic sharia law -- under greater scrutiny.

In June, inflation in the world's top oil exporter hit a 30-year high of 10.6 percent, mainly on increases in food and housing costs.

"It hasn't reached the point that it's barred us from traveling. We will still travel like we used to and maintain the same lifestyle," said Ohoud, a bank manager from Riyadh who did not want to give her last name.

However, she said she had noticed that salaries were not keeping pace with prices.

John Sfakianakis, chief economist at SABB bank, HSBC's Saudi subsidiary, said the government could not raise wages to match inflation if it wanted to avoid adding inflationary pressures, but it risked angering workers.

"Public sector workers don't understand why the government is not raising wages to match inflation; there is a disconnection between expectations and what the government delivers and so there is discontent," he said.

THE WEALTH GAP

A January wage hike of 5 percent for government employees disappointed those Saudis who earn less than 10,000 riyals ($2,666) a month, especially after Gulf neighbors moved more quickly to raise wages by larger amounts.

Saudis earning less than that figure would still expect to employ a driver and at least one maid. They are not taxed and receive free health and education and other benefits.

"I don't feel it has affected me too much because my family's financial situation is good," said Najla, 22, a bank intern in Riyadh, who did not give her last name.