Qatar’s inflation may drop to 1.5% this year

A drop in Qatar’s inflation based on the consumer price index (CPI) has been projected for this year by the Bank of America Merrill Lynch, which also scaled down the country’s inflation for 2013 without citing specific reasons.

In its GCC economic forecast yesterday, the Bank of America Merrill Lynch (BOAML) said Qatar’s inflation would drop to 1.5% this year (from earlier projection of 2%) and 2% in 2013 (from 3% earlier). Rising rents were the main driver for inflation in Qatar, but that situation has clearly changed. Rents are under pressure because of excessive supplies in the market.

For a few years in the last decade, Qatar fought hard to tame inflation, which stood at double digits. That was when the country faced a shortage for affordable housing. Last month, leading property management company Asteco said rental growth for the remainder of this year may be “limited” as a significant amount of apartments are scheduled to complete by the year end.

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According to the International Monetary Fund, Qatar’s average inflation is expected to be 4%-5% in the medium term and risks related to it have risen due to a huge increase in public sector wages. In its latest report, BOAML also said Qatar’s GDP would grow 6.1% this year in line with the International Monetary Fund’s projections, based on the “strong” performance of the non-hydrocarbon sector.

The country’s GDP will grow 5% in 2013, it said. The BOAML report shows Qatar will outperform its Gulf neighbours on economic growth this year and in 2013. The BOAML projected GDP growth rate in other five GCC countries this year and in 2013 are: Saudi Arabia (5%, 3.8%), Oman (3.3%, 3.3%), UAE (3%, 3%), Kuwait (3%, 3%) and Bahrain (2.4%, 2.9%).

Large infrastructure investment and increased production in the manufacturing sector will boost Qatar’s real non-hydrocarbon GDP growth, which will accelerate to 9%, the IMF had earlier said. Qatar’s economic outlook for 2012 remains “positive” despite increased external risks, the IMF said as it projected a 9% growth for the country’s non-hydrocarbon sector next year.

Large infrastructure investment and increased production in the manufacturing sector will boost Qatar’s real non-hydrocarbon GDP growth, which will accelerate to 9%, the IMF said. In May, the Bank of America Merrill Lynch held the view that Qatar’s GDP would grow at 3.3% in 2012, without citing reasons.

source: Gulf Times

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