The Riyadh Shawarma Index reveals the missing economic truth: a lower inflation rate does not mean prices are falling, but rather that their continued rise is slowing.
The Riyadh Shawarma Index reveals the missing economic truth: a lower inflation rate does not mean prices are falling, but rather that their continued rise is slowing.

The "shawarma sandwich" in the Saudi capital, Riyadh, provides a vivid and simple example of inflation and the erosion of money's purchasing power over two decades. The price of a shawarma sandwich rose from 3 riyals 20 years ago to 9 riyals today, an increase of 200%—far exceeding the Kingdom's overall inflation rate of 84% over the same period.

The dimensions of this real-world economic phenomenon become clear through two key factors: costs and the erosion of purchasing power:

What goes into this sandwich? (Cost components)

Five key factors combined to drive up the price of this popular food product at a rate higher than overall inflation:

  1. Digital delivery: Rising commissions charged by delivery apps, which take a direct share of the restaurant's sales.
  2. Regulatory costs: Value-added tax (VAT) and commercial electricity and water tariffs.
  3. Labor: Higher wage levels, recruitment costs, and government fees associated with workers.
  4. Rents: Record increases in commercial rents on Riyadh's busiest streets.
  5. Imports and supply chains: Rising prices of imported chicken, cooking oil, and spices as a result of crises and disruptions to global maritime shipping.

Erosion of purchasing power: 100 riyals then and now

  • In 2002: 100 riyals could buy a consumer 33 shawarma sandwiches.
  • Today: The same 100 riyals buys only 11 shawarma sandwiches.

The economic truth: “A decline in inflation does not mean that prices are retreating or falling; it only means that the pace of their increase is slowing. Prices continue to rise, while purchasing power steadily erodes over time.”