Macroeconomic Forecast Qatar

Qatari CPI came in at a record 14.8% y-o-y in Q107, with rent, fuel energy prices rising by 34.8% y-o-y, food and beverages by 6.3% y-o-y and garments and footwear by 12.8% y-o-y. Qatar has the highest official inflation in the Gulf Cooperation Council, with 11.8% y-o-y inflation in 2006 compared to the UAE's 9.3% y-o-y. We see inflation remaining elevated this year at 12% but see CPI easing as supply bottlenecks, particularly related to housing, are relieved over the longer term. That said, liquidity growth (M3), which came in at 33.9% y-o-y in January, coupled with high levels of government spending, will also need to come down to more sustainable levels for prices to start heading down. While high prices pose a risk to competitiveness and economic activity levels in Qatar, we see the country maintaining robust levels of growth, which should stay above 6% on average annually over the forecast period.

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