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02 October 2023

Qatar sees inflation stabilising in 2008

By Agencies

Inflation in Qatar should stabilise at near-record levels, but not decline this year, as higher food and building material costs offset a fall in rental inflation, the Gulf country's finance minister said on Sunday.


Inflation in Qatar rose slightly to 13.74 per cent at the end of December, its second-fastest pace on record, as rents and food prices surged.


"The government's (objective) is not to have more inflation than we have now...we are trying of course to reduce it, but it takes time," Youssef Hussein Kamal told Reuters in an interview in Qatar's capital, Doha.


Kamal said the two-year rent freeze introduced at the start of March and plans to increase housing supply in the market would help curb inflation.


A 30 per cent rise in global food prices in 2008 and 2009 and an increase in building material costs would keep inflation at about 13.7 per cent, he said.


"We don't forget on the other hand that raw materials are going up worldwide, which means that rents could go down temporarily, but if there aren't sufficient housing units under construction you could see again the same housing problem," Kamal said.


Like most other Gulf states, Qatar's dollar peg forces it to track US monetary policy at a time when the Federal Reserve is cutting interest rates to help the US economy ward off recession.


The Fed has slashed rates by 225 basis points in five moves since September 18 and is expected to reduce rates at least by another 50 basis points at a policy meeting on March 18, according to a Reuters poll.


The economic strains caused by following Fed policy have led some Gulf officials to call for a revaluation of dollar pegs to help tackle inflationary pressures. But last week, Qatar's central bank denied reports it could revalue or de-peg its currency as early as next month.


Kamal declined on Sunday to answer any questions on currency policy, saying Qatar’sposition was already clear.


Qatar will keep its riyal pegged to the dollar at the same rate for now, its central bank governor said on Wednesday.


Since January, Qatari officials including the prime minister, finance minister and an economic adviser to the emir have said they are studying options on currency reform to fight inflation.



Economic growth


Kamal said Qatar's economy grew about 15 to 16 per cent in 2007 and added that the expansion of oil, gas and financial services will continue to spur double digit economic growth.


Kamal said nominal economic growth was 31 per cent in 2007.


"When you deduct inflation it could be in the range of 15 to 16 per cent," he said.


"In the coming five to six years, we will see double digit economic growth," he said, adding that the banking sector was expected to grow 17.7 per cent in 2008 and nearly 15 per cent a year in the next five years.


Kamal said the Qatari economy would not face any impact from the US subprime crisis as local banks had not invested in those areas.


"We are not part of subprime turbulence in US...thank God our banks didn't have any investments in these sectors.” (Reuters)