By Pratap John/Chief Business Reporter

The influx of expatriate workers will put “moderate pressure” on domestic prices in Qatar, QNB has said in a report.

The rapidly expanding population should boost domestic inflation, offsetting lower foreign inflation.

“We expect population growth to reach 10.1% in 2014 and average 6% in 2015-16, adding to demand and driving up rents,” QNB said in its latest “Qatar Economic Insight”.

As a result, QNB expects domestic inflation to average 5.5% over the next three years. Counterbalancing this, foreign inflation is expected to decline in 2014-15 as international commodity prices are forecast to fall on weak global demand and record food harvests.

QNB forecasts overall inflation to increase modestly to 3.4% in 2014 and 3.5% in 2015 as rising rents are offset by lower international food prices.

With food prices expected to rise again in 2016, overall inflation would accelerate to 4.4% as strong domestic demand continues to drive up rental inflation.

Inflation averaged 3.1% in 2013, compared to 1.9% in 2012.

Inflationary pressures eased in the second half of 2013 as lower rent inflation (accounting for 32% of the Consumer Price Index basket) drove down domestic inflation.

Rent inflation tends to track land prices with a lag of about six months.

As a result, the recent increase in land prices is likely again to put upward pressure on domestic inflation.

Foreign inflation (27% of the CPI basket) remained low in 2013 owing to flat international commodity and food prices, helping to moderate overall inflation.

The implementation of the infrastructure investment programme requires large numbers of workers, accelerating population growth.

The total number of people in Qatar reached 2.1mn in March 2014, with females accounting for about a quarter of the total population.

Expatriates accounted for 87% of the population and 94% of the work force, while unemployment was 0.2% in the fourth quarter of 2013, according to the latest labour survey.

The large investment spending is attracting a new wave of expatriate workers, QNB said. 

As project activity picked up in 2013-14, population growth accelerated to 10.5% (12-month annual average). The rapid expansion of the population is driving a second round effect on growth, particularly in services such as finance, hotels and restaurants, trade and transport.

 

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