Qatar’s international reserves record $43.5 billion, driven by a strong current account surplus…

Driven by a strong current account surplus, Qatar’s international reserves rose to an all-time high of $43.5bn in August, up $7.2bn on the same period in 2013, QNB data show.

At end-August 2013, Qatar’s international reserves stood at $36.3bn, QNB Monthly Monitor said.

“The large increase reflects the strong current account surplus Qatar is enjoying on relatively high hydrocarbon prices,” it said.

The latest data show that the import cover stood at 8.2 months at end-August 2014, well above the IMF-recommended level of three months for pegged exchange rates.

Qatar’s international reserves have been steadily rising over the years on large current account surpluses, QNB said.

Going forward, it expects reserves to rise further in 2014 and 2015 on continued high current account surpluses.

Qatari oil prices fell in August owing to weaker global demand, QNB said.

The stagnant eurozone economy, the large second-quarter contraction in Japan and the slowdown in emerging markets are contributing to the weakness in hydrocarbon demand and putting downward pressure on international oil prices.

“Qatar’s crude oil production has been on a general decline, but redevelopment plans should stabilise output,” the report said.

In recent years, Qatar Petroleum has implemented a redevelopment programme to steady production at its oil fields.

This heavy investment in existing oil fields such as Bul Hanine, Al Shaheen and Dukhan, should lead to a stabilisation of oil production of about 700,000 bpd.

Qatar’s foreign merchandise trade balance registered a surplus of QR31.5bn in August, the QNB report said.

The surplus, however, decreased 3.9% year-on-year, primarily on a strong rise in imports (17.5% year-on-year) related to the growing population and large investment spending.

Total exports rose 0.3% year-on-year in August last year on a recovery of oil production, QNB said.

Total exports in August stood at QR40.8bn and imports at QR9.3bn.

Japan topped the export destination in August, accounting for 24.8% of Qatar’s exports, followed by South Korea (14.8%) and India (13.6%).

China was the largest exporter to Qatar in August (11.8%), followed by the UAE (8.3%) and the US (8%).

Qatar’s Consumer Price Index (CPI) for August 2014 rose 3.8% year-on-year.

On a month-on-month bases, it increased 0.8% relative to July 2014.

Housing and rents (the largest component of overall inflation with a 32.2% share) rose 0.6% month-on-month (7.9% year-on-year) in August 2014 leading to an acceleration of domestic inflation.

Counterbalancing these domestic inflationary pressures, foreign inflation has been on a downward trend this year as international food prices have been falling on record global food harvests and large stockpiles.

Domestic food prices rose in August 1.7% month-on-month (1.2% year-on-year) owing to seasonal effects, raising foreign inflation to 2.7%, an eight month high.

“We forecast overall CPI inflation to accelerate further in the remaining months of 2014 and average 3.4% in 2014 and 3.5% in 2015,” QNB said.

Domestic inflation will mainly be driven by rising rents in response to the growing population. Lower international food prices are likely to keep foreign inflation low, thus partly offsetting the rise in domestic inflation.

However, QNB said there was a risk that large investment spending and the growing population could lead to supply bottlenecks owing to limited domestic capacity.

“This could push up domestic prices more than expected in our baseline forecasts,” QNB said. Source: Gulf Times