Qatar’s inflation may hit 4% in 2015
August 03 2014 01:06 AM
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Strong demographics and a congested projects market will see Qatar’s inflation climbing to 4% in 201
Strong demographics and a congested projects market will see Qatar’s inflation climbing to 4% in 2015, a new report has shown.

 

Strong demographics and a congested projects market will see Qatar’s inflation climbing to 4% in 2015, a new report indicates.

This is despite international factors keeping a lid on prices, Samba Financial Group  said in the report.

Qatar’s inflation rose to 3.4% in May, with the pressures from rising rents (7%) partly alleviated by soft global commodity prices, it said.

“We expect commodity prices to continue to soften through 2015 as the impact of additional slack from China’s deleveraging and anticipated strengthening of the dollar are offset by strong population growth and project spending. On balance, we forecast moderate inflation at 3.4% in 2014 and 4% in 2015,” Samba said.

Large-scale project spending can lead to inflation, the report said. Against the backdrop of expansionary investment spending, rapid inflation can be the most obvious pressure point of the economy. Though it ticked up in May, to 3.4%, Qatar’s headline CPI figure is still benefiting from soft international commodity prices.

“We expect imported inflation to remain low as the dollar strengthens over the next two years, driving down prices via the pegged currency,” Samba said.

The slowdown in investment in China will also help keep prices soft as countries that are plugged into the China supply train add slack to the market for construction related commodities such as steel. The upside risk to the commodity price outlook is based around the concentration of demand in the Gulf region.

Locally, there may be greater competition for specific construction materials as a number of Gulf countries ramp up the value of major projects.

Meed estimates that the value of projects planned or underway in the region currently stands at $3,293bn, up 9.4% in the last 12 months.

The Ministry of Economy and Commerce stated that certain materials were being stockpiled to mitigate against this threat.

The main driver of domestic inflation in Qatar is that of rents which has a 32% weight in the consumer price index. Rents grew by 7% in the year to May, having averaged 6% for the last 12 months.

Rents are being driven primarily by strong population growth which is unlikely to abate over the medium-term, Samba said.

“Whilst we expect benign international factors to help keep a lid on prices, strong demographics and a congested projects market will see inflation to climb to 4% in 2015,” the report said.

 

Against the backdrop of expansionary investment spending, rapid inflation can be the most obvious pressure point of Qatar’s economy, according to a new study

 

Strong demographics and a congested projects market will see Qatar’s inflation climbing to 4% in 2015, a new report indicates.

This is despite international factors keeping a lid on prices, Samba Financial Group  said in the report.

Qatar’s inflation rose to 3.4% in May, with the pressures from rising rents (7%) partly alleviated by soft global commodity prices, it said.

“We expect commodity prices to continue to soften through 2015 as the impact of additional slack from China’s deleveraging and anticipated strengthening of the dollar are offset by strong population growth and project spending. On balance, we forecast moderate inflation at 3.4% in 2014 and 4% in 2015,” Samba said.

Large-scale project spending can lead to inflation, the report said. Against the backdrop of expansionary investment spending, rapid inflation can be the most obvious pressure point of the economy. Though it ticked up in May, to 3.4%, Qatar’s headline CPI figure is still benefiting from soft international commodity prices.

“We expect imported inflation to remain low as the dollar strengthens over the next two years, driving down prices via the pegged currency,” Samba said.

The slowdown in investment in China will also help keep prices soft as countries that are plugged into the China supply train add slack to the market for construction related commodities such as steel. The upside risk to the commodity price outlook is based around the concentration of demand in the Gulf region.

Locally, there may be greater competition for specific construction materials as a number of Gulf countries ramp up the value of major projects.

Meed estimates that the value of projects planned or underway in the region currently stands at $3,293bn, up 9.4% in the last 12 months.

The Ministry of Economy and Commerce stated that certain materials were being stockpiled to mitigate against this threat.

The main driver of domestic inflation in Qatar is that of rents which has a 32% weight in the consumer price index. Rents grew by 7% in the year to May, having averaged 6% for the last 12 months.

Rents are being driven primarily by strong population growth which is unlikely to abate over the medium-term, Samba said.

“Whilst we expect benign international factors to help keep a lid on prices, strong demographics and a congested projects market will see inflation to climb to 4% in 2015,” the report said.

Strong public investment spending ‘to lift real GDP growth’

 Strong public investment spending is expected to give a push to Qatar’s real GDP (gross domestic product) growth to 6.7% this year and 6.9% in 2015, a  report released by Samba Financial Group has said. Qatar’s economy continued its strong growth in the first quarter of 2014, expanding by 6.2% on a 12-month basis, up from 5.5% in Q4, 2013, Samba Financial Group has said in a report. The growth was driven exclusively by the non-hydrocarbon sector, which is testament to the plans set out in the National Development Strategy. Finance, construction, trade, restaurants, hotels and government services each contributed between 0.9 – 2.3 percentage points to GDP growth.

These sectors have benefited from large government spending projects aimed at improving the country’s infrastructure whilst proving a catalyst for the diversification of the economy. This spending is forecast at $210bn up to 2021, $160bn of which will be financed through the budget, Samba said. The hydrocarbon sector detracted 0.5 percentage points from the total growth figure, mainly due to receding oil production and the moratorium on natural gas production. Oil production has fallen due to the maturing of oil fields such as Dukhan, Maydan Mahzam and Bul Hanine,
which were all first exploited more than thirty years ago, the report said.

 

 

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