1. Page 1 of 2
Economic Commentary
QNB Economics
economics@qnb.com
17 May, 2015
Qatar’s Inflation Moderates on Lower Foreign Inflation
Inflation in Qatar continued to slow in the first
four months of 2015. According to the Ministry
of Development Planning and Statistics
(MDPS), consumer price index (CPI) inflation
fell to 0.9% year-on-year in April 2015. The
key driver of this slowdown in inflation is
lower foreign inflation, particularly food
prices. Going forward, we forecast overall
inflation to average 2.5% this year as the
growing population is expected to push up
domestic inflation, which will offset slower
foreign inflation.
Foreign inflation continues to slow as
international food inflation have fallen on
record global food harvests, large US
stockpiles and weak demand. According to the
IMF, this trend is expected to persist for the
rest of this year. Given that Qatar has limited
domestic food production, these lower
international food prices are therefore likely to
continue slowing Qatar’s food inflation. Prices
in the other components of foreign inflation
(clothing and footwear, furnishings and
household equipment) also growing
moderately in April 2015. As a result, we
forecast foreign inflation to average only 0.7%
this year, rising moderately to 1.8% in 2016
and 1.5% in 2017 as international food prices
begin to stabilise.
Counterbalancing this low foreign inflation,
domestic inflation remains higher owing to
rising transportation costs (6.0% year-on-
year) and rents (3.0% year-on-year). The
combination of rapid population growth (8.7%
year-on-year in April 2015) and higher GDP per
capita is leading to a strong increase in
domestic demand. This is pushing up vehicle
and maintenance prices as well as rents.
Accordingly, we project domestic inflation to
rise to 3.7% in 2015 as a result of strong
domestic demand and rise further to 3.8% in
2016 and 4.0% in 2017.
Qatar CPI Inflation
(% change; weights shown in brackets)
Sources: MDPS and QNB Group analysis and forecasts
The MDPS has recently introduced the
representative basket of consumer goods and
the weights upon which the CPI calculations
are based. The CPI index has been rebased on
2013 prices (previously it was based on 2007
prices). Interestingly, the weight for “Housing,
Water, Electricity and Gas”, has been reduced
to 21.9% compared with 32.1% previously.
The reduction is partly explained by the
change in methodology for the computation of
rental inflation, following the exclusion of
imputed rental of owner-occupied dwellings.
According to the MDPS, the revision are done
3.3
3.7 3.8 4.0
2.0
0.7
1.8
1.5
3.0
2.5
3.2 3.3
2014 2015f 2016f 2017f
Domestic (74%) Foreign (26%) Total

2. Page 2 of 2
Economic Commentary
QNB Economics
economics@qnb.com
17 May, 2015
to better reflect the changing pattern of
consumption in Qatar.
Qatar CPI Subcomponent Weights
(%)
2007
Old
Weights
2013
New
Weights
Overall inflation 100.00 100.00
Food and Beverage 13.00 12.58
Tobacco 0.30 0.27
Clothing and Footwear 5.80 5.11
Housing, Water, Electricity and Gas 32.20 21.89
Furnishings and Household Equipment 8.20 7.70
Health 2.00 1.79
Transport 15.00 14.59
Communication 5.50 5.87
Recreation and Culture 4.10 12.68
Education 6.70 5.75
Restaurants and Hotels 3.70 6.08
Miscellaneous Goods and Services 3.50 5.69
Source: MDPS
In summary, Qatar’s inflation continued to
slow in the first four months of 2015 but is
expected to rebound in the months ahead.
Looking ahead, we forecast overall inflation to
rise from 2.5% in 2015 to 3.2% in 2016 and
3.5% in 2017 on rising rent inflation as well as
a recovery in international food prices. The
recent moderation in inflation is conducive for
higher growth in Qatar. Indeed, we forecast
real GDP growth to accelerate to 7.0% in 2015,
7.5% in 2016 and 7.9% in 2017.
Contacts
Rory Fyfe
Senior Economist
+974-4453-4643
Ehsan Khoman
Economist
+974-4453-4423
Hamda Al-Thani
Economist
+974-4453-4646
Ziad Daoud
Economist
+974-4453-4642
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