• Global : َQatar Consumer Price Index (CPI) witnessed double digit growth of 11.8% in 2006 as while it registered a growth of 13.8% in 2007
Global Investment House – Kuwait – Qatar Economic and strategic Outlook – Inflation- For the past 2-3 years, Qatar is witnessing robust economic growth and increased liquidity resulting in high inflationary pressures. In 2007, inflationary pressure increased mainly on the back of rising rents of dwelling units. The Consumer Price Index (CPI) witnessed double digit growth of 11.8% in 2006 as compared to 8.8% growth registered in 2005 while it registered a growth of 13.8% in 2007. One of the major drivers for this high inflation is continued rise in property rents. High per capita GDP and increased spending power of consuming class of Qatar also add to inflation woes. US dollar which acts as the reserve currency of the world is having bad run and loosing its strength against major currencies making import bill for goods and commodities quite high for countries like Qatar.
Despite growing at a steep rate in 2006, the price index for rent, fuel & energy shot up by a whopping 29.35% in 2007 from 221.91 to reach 287 at the end of 2007. Despite the rent cap by the government, property rents have grown at rapid pace much to the discomfort of government agencies.
Two segments namely, rental, fuel & energy and clothing & foot wear sectors witnessed double digit growth rate in 2007. These segments witnessed a growth of 29.35% and 12.58% respectively. All other segments witnessed a growth of less than 10%. Prominent among these were food, beverages & tobacco (7.35%), furniture & furnishing (5.41%), education, culture & recreation (4.96%), miscellaneous goods and services (4.55%), transport & communication (2.35%) and medical services (1.22%). The notable feature was that overall inflationary pressure in the economy was so wide spread that none of the sectors has witnessed decline in their price indices during 2007.
Rent cap of 10% was set by Qatar government for two years in 2005. A new rent law passed in March 2008 forbids the increase of rents pertaining to contracts signed after January 1, 2005. Increases will only be allowed after 2 years from the date of the new law coming into effect (i.e. March 2010). The law also states that rents may be increased for contracts signed before January 1, 2005, up to a maximum of 20% (depending on the amount of rent already paid).
Consumer Price Index (2001=100)
End of Period 2005 Y-o-Y Change (%) 2006 Y-o-Y Change (%) 2007 Y-o-Y Change (%)
Food, Beverages & Tobacco 107.5 3.10% 115.4 7.31% 123.8 7.35%
Clothing & Footwear 101.8 -2.70% 114.5 12.44% 128.9 12.58%
Rent, Fuel & Energy 176.2 26.30% 221.9 25.94% 287.0 29.35%
Furniture & Furnishing 106.7 4.70% 110.9 3.91% 116.9 5.41%
Medical Services 103.3 4.40% 104.6 1.21% 105.8 1.22%
Transport & Communication 99.7 3.90% 101.6 1.87% 104.0 2.35%
Education, Culture & Recreation 102.2 -0.10% 104.5 2.28% 109.7 4.96%
Miscellaneous Goods & Services 114.9 4.10% 130.5 13.59% 136.5 4.55%
General Index 119.1 8.81% 133.2 11.8% 151.6 13.76%
Source: Qatar Central Bank and The Planning Council
Qatar has recorded the highest inflation rates in the oil-rich Gulf region over the past three years mainly because of a sharp rise in food prices, soaring rents and a surge in projects caused by a sustained economic boom. Runaway materials costs and shortages are putting pressure on Qatar's construction sector, threatening budget projections and raising the possibility of late delivery on some projects. With the Qatari riyal pegged to the US dollar and falling strength of the US dollar against the euro has resulted in an increase in the price for imported building materials. We believe, Qatar needs to proactively address all these to help its real economy to grow at good pace.
