Growth Rate - Consumer Price Index for Qatar - Assignment Example

with prev. year (a) Prev. year (b) (a / b)100 2001 1.2 82.7 1.45% inflation 2002 0.2 83.9 0.24% inflation 2003 1.9 84.1 2.26% inflation 2004 5.9 86.0 6.86% inflation 2005 8.1 91.9 8.81% inflation 2006 11.8 100.0 11.8% inflation 2007 15.4 111.8 13.77% inflation 2008 19.2 127.2 15.09% inflation 2009 -7.1 146.4 4.85% deflation 2010 -3.4 139.3 2.44% deflation 2011 2.6 135.9 1.91% inflation ( The World Bank, 2012) Qatar’s economic progress was impressive from 2005 to 2009 in spite of the global recession in the later part of the period.

There was a 9 percent real overall GDP (Gross Domestic Product) growth. In the year 2008, GDP growth was 16 percent. This was because of increase in the production level of liquefied natural gas (LNG) and condensates. Also, there was a good development in the nonhydrocarbon sector. All these factors led to continuous price inflation from 2005 to 2009 (IMF Executive Board Concludes 2009 Article IV Consultation with Qatar, 2010). Inflation reached the peak in 2008 with 15 percent. This was the highest inflation rate among all the GCC countries and Qatar which is the wealthiest Arab nation experience such a huge jump in inflation rate because of weakening US dollar.

The inflation was also due to other factors like increase in domestic rents, rise in food prices and heavy domestic demand of oil. According to a study conducted by Qatari National Bank (QNB), there was a three-fold increase in consumer prices in Qatar during the years between 2005 and 2009 resulting in average of 8.9 percent. This figure is very high compared to the average during 2000-2004 which was 2.5 percent. The consistent rise of housing costs was the main reason behind the growing inflation from 2005 till 2008 (Kawach, 2010).

However, in 2009 Qatar’s economy witnessed a sharp deflation of 4.85 percent. This was due to a sharp decline in the domestic house rents. This decline in domestic house rent occurred in all Gulf Cooperation Council (GCC) countries, but Qatar witnessed the maximum decline. Economic growth was mostly encouraged by the fiscal policy through consistent spending in development sector. However, for this few projects of government were given greater priority. Because of the increase in prices of oil and gas the external current account was approximated a large surplus with almost 15.

7 percent of GDP. The gross reserve of central bank was further strengthened to around 5 months of imports of goods and services (IMF Executive Board Concludes 2009 Article IV Consultation with Qatar, 2010). Qatar which is the leading LNG exported in the world faced deflation for the second consecutive year in 2010 with rents declining more than the previous year. According to Saudi American Bank Group (SAMBA) Qatar was deeply entrenched in deflation for two fiscal years although there was speculation of heavy growth in the economy due to increasing LNG exports, rising oil prices and large scale public spending.

During the last quarter of 2010, oil and non-oil sectors were speculated for upward trends while construction and real estate industries remained unchanged. SAMBA said “excess supply in the real estate sector continues to put pressure on rents which is being reflected in