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Qatar Inflation Seen Significantly Down in 2009

Inflation has slowed sharply in the Arab Gulf after oil and property prices plunged. Qatar’s economy enjoyed strong growth rates, unlike the rest of the Gulf, as the world’s top natural gas exporter kept its oil and gas output 
intact.

“Inflationary pressures in Qatar are also expected to be lower as demand pressures are low,” Shaikh Fahad said on Thursday in an e-mailed response to Reuters’ questions.

“Overall, inflation is expected to be significantly lower than the high levels of 2008, despite some pressure from international oil prices,” he said without giving a specific forecast.

Qatar is likely to see consumer prices fall by 3.5 per cent on average in 2009 from the previous year, a Reuters poll showed last month, after a 15 per cent jump in 2008.

The country’s price index edged down 0.1 per cent in October from the previous month on lower food prices and rents. Oil prices have doubled since the start of the year but remain well below record peaks from July, 2008.

Shaikh Fahad also echoed gross domestic product, or GDP, growth forecasts for fiscal years of 2009 and 2010, mentioned by the country’s ruler Shaikh Hamad bin Khalifa Al Thani last month. “GDP growth in 2009 and 2010 is expected to be about 9 per cent and 16 per cent, respectively. This outlook for growth is based on the assumption that gas exports to the US and the euro area would be buoyant,” Shaikh Fahad said.

“In the longer term, the outlook for growth in Qatar is positive,” he said. “GDP originating from oil, however, is likely to be volatile due to large fluctuations in international crude oil prices.”

The fiscal year in Qatar, which pegs its currency to the US dollar to anchor inflation, starts in April.

The cash-rich state is expected to keep outperforming key players in the world’s top oil producing region — Saudi Arabia and the United Arab Emirates — in the coming years thanks to massive expansion of its gas facilities.

Analysts polled by Reuters expected Qatar, which sits on the world’s third-largest natural gas reserves, to grow 8.0 per cent and 12.5 per cent in calendar years of 2009 and 2010, respectively.

Shaikh Fahad also said the central bank was likely to keep key interest rates unchanged for now to maintain a positive differential against the United States benchmark rate in order to prevent capital outflows.

“Overall, the outlook is that of stable interest rates which is conducive for growth and the maintenance of financial stability,” he said. Qatar did not join last year’s wave of rate cuts by central banks in the region, Europe and the US, keeping its main repo rate at 5.55 per cent since May 2008. The Fed’s benchmark overnight interest rates are expected to stay in a range of zero to 0.25 per cent for an extended period.