Posted on August 07, 2014

Driven by a large current account surplus, Qatar's international reserves surged to $42.2bn in June, latest QNB data show. The country's international reserves have been "steadily rising" over the years on large current account surpluses, QNB said in its latest "Qatar Monthly Monitor".

The latest available information suggests that import cover stood at 7.9 months at end-June, well above the International Monetary Fund-recommended level of three months for pegged exchange rates. Qatar's current account balance stood at $17.2bn in the first quarter of this year, QNB said. Qatar's foreign merchandise trade balance registered a surplus of QR32.3bn in June 2014, the report showed.

The surplus fell 1.3% year-on-year due to a large increase in imports (23.3%), reflecting strong domestic demand. Meanwhile, merchandise exports grew by 3.3% on high gas and oil prices. Total exports in June stood at QR41.5bn and imports at QR9.2bn.

Japan topped the export destinations in June accounting for 26% of Qatar's exports, followed by South Korea (18%) and India (11%). The UAE was the largest exporter to Qatar in June (13%), closely followed by China (11%) and the US (10%). 

According to QNB, domestic demand in Qatar is growing strongly on the back of "investments and private consumption". Strong domestic demand from investments and private consumption drove double-digit non-hydrocarbon growth (11.5%) in Q1, 2014.

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The share of investment in GDP rose to 28.2%, compared with 26.8% a year earlier, QNB said quoting the Ministry of Development Planning and Statistics (MDPS). This, it said, was driven by the implementation of major projects in preparation for the FIFA 2022 World Cup. The share of private consumption to GDP rose to 13.8% in Q1, 2014 (13.2% a year earlier).

"The share of private consumption remains low by international standards, but is expected to rise over the medium term," QNB said. Overall CPI inflation in Qatar fell 2.8% in June, partially due to falling international food prices, QNB said.

Qatar's Consumer Price Index (CPI) fell to 2.8% year-on-year in June 2014, from 3.4% the previous month. Falling international food prices were the key factor behind the slowdown in foreign inflation. Overall, foreign inflation contributed 0.4% to overall inflation in June 2014. The contribution of domestic inflation fell to 2.4%, notwithstanding rising rent, fuel and energy inflation (7.4%).

"We expect further growth in population to drive domestic inflation, leading to a modest rise in overall inflation to 3.4% for 2014 as a whole. However, there is a small risk that the fast-growing economy could lead to supply bottlenecks owing to limited domestic logistics capacity, pushing up inflation more than expected," QNB said.

source: Gulf Times

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