Consumer prices up by just two percent

In four years education and restaurant
prices witnessed the highest price hikes

The consumer price index witnessed an increase of about 2.1 percent from June 2011 to June 2012, according to a report issued by the Central Administration of Statistics. Prices of food and non-alcoholic beverages rose by about 5.7 percent. Alcoholic beverages and tobacco prices went up by about 11 percent.

For the four-year period from June 2008 till June 2012, the average price for food and non-alcoholic beverages increased by about 25 percent. Restaurant and hotel prices increased about 36 and 46 percent respectively in the same period. This is the highest rise among all expense categories.

Raja Nasri, general manager at Turkey Ventures, a hospitality consulting company, said: “The main reason for the rise in prices for restaurants is the increase of employee salaries, in addition to the increase in the prices of all food items, from milk to meat, and all imported food items.” Exporting countries have raised the prices of food products and detergents as well, “so prices should also be increased,” he said.

Nasri said that restaurants’ expenses are divided as follows: “Thirty percent for food products, 25 percent for salaries, 20 percent overhead expenses, which leaves around 25 percent as profit margin. If the profit margin declines, the restaurants will not be able to pay back their debts to the bank”.

He said the increase in prices did not affect the frequency of visitors. “People pay for quality even if the price is higher,” said Nasri. He said the highest increase in restaurant and hotel prices was seen between 2008 and 2010. “The price rise in 2009 and 2010 did not have a major impact as tourism witnessed a boom in these years and investors were able to make big investments in this sector and we were able to achieve growth,” said Nasri.

Education expenses registered the second highest price hike in the same four-year period, as school and university fees increased by 30 percent. In the past year alone these fees rose by 7.5 percent.

Imad Al Ashkar, director of the Private Education Department at the Ministry of Education, said: “According to law number 515, schools can’t raise student’s fees unless additional financial burdens on the schools have emerged.” Between 2008 and 2012, many salary raises were given to teachers. In 2008, the government increased the minimum salary along with other salaries, and elementary and secondary school teachers were given a ‘grade rise.’

In 2012, the minimum wage was increased once again from LL500,000 to LL675,000. “Private schools were obliged to increase student’s fees in order to cover those expenses,” Ashkar said. “Any new rise in teachers’ salaries, which could occur after present negotiations, would lead to another increase in school fees.”

Reported By Rania Ghanem