Qatar's government budget surplus shrank sharply to 2.9 per cent of its economic output in fiscal 2010/11 as spending jumped, while inflation edged up slightly to at least a 19-month high in July, data showed on Tuesday.

The world's top liquefied natural gas exporter, whose $127 billion economy is seen growing at a double-digit clip in 2011, plans to spend nearly as much in the next five years on various projects ahead of hosting the 2022 soccer World Cup.

The Opec member's fiscal surplus dropped to 13.5 billion riyals ($3.7 billion) from 54.1 billion, or 15.2 per cent of gross domestic product, in 2009/10, the central bank's annual report posted on its website www.qcb.gov.qa showed. It still came above a planned surplus of 9.7 billion riyals.

Expenditures jumped 24 per cent to 142.4 billion riyals in the fiscal year that ended in March, 21 per cent above the original plan.

The state's revenue fell 8 per cent to 155.9 billion riyals despite a recovery in global crude prices as investment income plunged, although it was still 22 per cent above the government forecast, the report showed.

"The sharp reduction in the cash payments of dividends in investment revenues is attributed to the setback in the profits of Qatar Petroleum for the year 2009, transferred to the state budget for the fiscal year 2010/11, compared to 2008 partly due to the decline of the average oil prices during 2009," the central bank said.

Qatar, one of the top global investors through its sovereign wealth fund, set its 2010/11 budget with expenditures of 117.9 billion riyals and revenue of 127.5 billion based on an assumed oil price of $55 per barrel.

U.S. benchmark crude prices ranged between $64 and $107 per barrel in the year to the end of March. Hydrocarbon sales make up about 62 per cent of Qatar's total revenue.

Analysts polled by Reuters in June expected the budget surplus of the Gulf nation to rise to 10.9 per cent of GDP in the 2011/12 fiscal year.

 GDP REVISED, INFLATION UP

The central bank report also showed that Qatar's 2010 nominal gross domestic product was revised to 463.5 billion riyals, up from a previously reported 449.3 billion and representing 30.2 per cent growth from the previous year.

Figures for 2009 and 2008 were also revised. The central bank did not release 2010 GDP data in real terms.

Qatar's annual inflation edged up to 1.9 per cent in July, its highest level in at least 19 months, but consumer prices fell 0.3 per cent on the month due to a decline in housing and food costs, a separate release showed on Tuesday.

"Inflation won't be a problem in Qatar for some time to come. The continued fall in rents will be the main factor keeping inflation in Qatar low," said Paul Gamble, head of research at Jadwa Investment in Riyadh.

"It's surprising that food prices fell as higher food prices have occurred across the region and are normal during Ramadan," he said.

Housing and food costs, which together account for some 45 per cent of consumer expenses in Qatar, fell by 0.8 and 0.5 per cent month-on-month in July, data from Qatar's Statistics Authority showed.

Qatar returned to annual inflation last December after a protracted period of deflation. Analysts forecast average inflation of 3.2 per cent in 2011 after living costs fell by 2.4 per cent in 2010.