QATAR: Indications of rising inflation in Qatar … averaging 2% 2013 and 2.5% 2014

Indications of rising inflation in Qatar have been confirmed in a report by Bank of America Merrill Lynch, which sees inflation, determined by the consumer price index (CPI), averaging 2% this year and 2.5% in 2014.

Qatar is planning to spend about $140bn to build stadiums, roads, railways, airport, seaport and other infrastructure before it hosts the 2022 socce World Cup

BOAML, however, did not cite the reasons for the projected CPI inflation spike in Qatar.

Historically, rising rents, associated with population growth, were the main driver for inflation in Qatar.

According to QNB, overall inflation increased 3.6% year-on-year and 0.4% month-on-month to 2.4% in March this year.

Qatar’s inflation rate hit a record 15.2% in 2008, partly because of a building boom for the 2006 Doha Asian Games, logistical problems and bottlenecks, including difficulties in bringing enough building materials into the country.

With Qatar planning to spend about $140bn to build stadiums, roads, railways, airport, seaport and other infrastructure before it hosts the 2022 soccer World Cup, another phase of building boom is on the anvil.

Since the housing component has the largest weighting in the inflation basket (32.2%), escalating rents are sure to drive inflation in Qatar.

In the past, when inflation surged and touched double-digits, the government took very strong measures to contain it.

They included putting a ceiling on the annual rental increases and starting new low-cost residential projects.

Another effective tool against inflation is price regulation. In a statement late last year, the government said it would use regulatory powers to prevent traders from imposing “unjustified” price hikes on consumers.

In an earlier interview with Gulf Times the International Monetary Fund’s mission head for Qatar Ananthakrishnan Prasad urged Qatar to take steps to contain inflationary pressures in the medium term.

The headline inflation remained low in Qatar in 2010 and 2011 mainly because of depressed rents.

However, the housing market will catch up as the population increases, and then there are some “likely pressures” emerging from the ambitious investment programme, Prasad told Gulf Times. With infrastructure-related construction activities picking up and as the demand-supply situation in the real estate market converges in view of the expatriate population increase, inflation will gradually increase from 3% in 2013 to 5% by 2016, the IMF had said.

On gross domestic product, BOAML report projected Qatar’s GDP to grow at 5% in 2013 and 4.9% next year.

IMF had projected that Qatar’s economy would grow by 5.2% this year with “strong economic outlook” in the medium term mainly on the back of robust non-hydrocarbon growth.

The IMF’s last country report indicated the country’s nominal GDP would exceed $191bn this year from $184.7bn in 2012.

Realty transaction value hits QR4.8bn in April

Real estate transaction value in Qatar reached QR4.8bn in April, up 15% year-on-year, consultant Century 21 has said in a report.

The number of deals reached some 834 in April compared with 625 in the same period last year, up 25%.

“Despite growth in the number of transactions and overall transaction value recorded, the average value per single transaction registered a drop of an approximate 13% to QR5.8mn in April from QR6.5mn in the same month last year. According to Century 21, real estate transactions during April recorded a significant improvement in independent residential villas and vacant plots especially in areas such as Thumama, Wakrah, Rayyan and Umm Salal.

Source: Caye Global News, Gulf Times

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