IMF urges Qatar caution on inflation

The authorities — mindful of Qatar’s 2006-08 experience with double-digit inflation — intend to phase in investment projects.

Inflationary pressures in Qatar appear “contained” at the moment, but policymakers need to remain “vigilant”, IMF has cautioned.

The authorities — mindful of Qatar’s 2006-08 experience with double-digit inflation — intend to phase in investment projects gradually.

“However, if signs of overheating emerge, the authorities should smooth fiscal spending, and deploy further macro-prudential measures and liquidity withdrawal operations in case of excessive credit growth or risk-taking. This strategy can be supplemented by the authorities’ efforts to identify and remove bottlenecks in the supply chain,” IMF said.

Inflation rose early last year due to increased housing demand, but has fallen since then. With rents constituting over 30% of the CPI basket, a strong inflow of expatriate workers in the context of diminishing housing market pushed up CPI inflation to 3.7% year-on-year in April 2013.

However, inflation eased to 2.3% y-o-y in January as rents stabilised. Core inflation excluding food, rent, and utilities has also been on a downward trend, with core inflation in January standing at 1.4%. House prices have been growing strongly since the crisis-related drop in 2008-09, but according to crude measures, valuations appear broadly in line with fundamentals, IMF said.