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Qatar's Inflation rate set to rise Further

Qatar's inflation rate, high as it is, is set to rise further this year, an economic expert has said.

Marios Maratheftis (pictured), Regional Head of Research, (Middle East, North Africa and Pakistan ? Global Markets) of Standard Chartered, told The Peninsula yesterday the inflationary trend is set to continue and can only be reined in through a tightening of Qatar's monetary policy.

However, even if the monetary policy is tightened, it will take time for its effects to set in. "It will take some time to work. It will take a year or so for inflation to go down," said Maratheftis.

Generally though, Maratheftis and Standard Chartered is bullish on Qatar as an investment destination. "There is a long-term vision with an established track record. Diversification is also taking place," he said. (The Peninsula) End Post

Qatar and the rest of the GCC, he said, have been hurt by rises in the prices of steel and other construction materials. There have been delays in deliveries to the GCC as countries like India, China and Brazil are in the middle of construction booms of their own. It has led to a veritable queue for construction essentials.

The end result is projects have been delayed. "There are $2 trillion of projects in the region, a figure that will soon rise to $2.5 trillion. Only 25 percent of projects have been started. Capacity constraints are a challenge,"
he said.

"There are delays in deliveries (of raw materials) to the Gulf. The phenomenon is worsened as the currencies are tied to the US dollar," he said.

Maratheftis feels there is a need to break the Qatari riyal-dollar peg. "A move away would be preferable. But there is also a sense of loyalty (to the greenback)," he said.

The dollar has served the country well in the past and perhaps Qatar's sticking to the currency peg could be a way of showing it has been with the dollar in good times and will stick with it through the bad. Said Maratheftis: "The pegs have been in place a long time and have served the countries well in the past."

Some encouraging signs are being shown in tackling inflation, which is the highest in the region.

"The Qatar Central Bank (QCB) move to impose restrictions is a measure to be welcomed. But there is a need for monetary policy tightening. But we remain confident on Qatar and we do not think it (economic boom) is a one-off," he said.

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