Qatar economic boom faces constraints | Qatar economic boom faces constraints -

Qatar economic boom faces constraints

Qatar: Thursday, January 24 - 2008 @ 21:21

“Qatar is not a poor country catching up, it’s a rich country growing, which is even more impressive,” said Marios Maratheftis, Head of Research of the Middle East, North Africa & Pakistan at Standard Chartered Bank during the MEED Qatar Conference.

But sustaining this level of growth is the real challenge the country is facing as the decision to remove the dollar peg, which already has lost 40 per cent of its value, remains undecided. Officials have currently put this issue on hold and labeled it as being a “sensitive” option.

But the results of leaving the peg have been less subtle, forcing the already inflamed inflation rate to further increase. “In order to contain the inflation rate and continue the economy’s growth Qatar has to do something about its currency,” said Maratheftis.

According to official figures, the rate of inflation for FY2007 was 12 per cent, while independent records claim is closer to 14 per cent. “The second best action would be to revalue the riyal by about eight to 10 per cent and that would cut down the rate of inflation,” suggested Maratheftis. He expects that this process will take place during the first quarter this year.

Maratheftis further suggested that “deeper capital market bonds” have to be established by the government in order to absorb the excess liquidity in the market. “This will help clam down the inflation level too,” he said.

Taking a similar stance on future of the dollar peg, Saudi Arabia has said it will not abandon the dollar unless it drops by 30 per cent, which will at least take two years to happen.

But Yousef Hussain Kamal, Minster of Finance & Economy & Commerce of Qatar, was not worried about the slowdown in the US economy affecting his country. “The US is not Qatar’s main trading partner, but countries in Asia and Europe are so we will not be impacted but its drop,” he said.

Over the past five years the US economy has been experiencing a slowdown in its economy with an average 0.5 per cent growth in 2007 nearing the recession line. But with the GCC’s account surplus touching $750bn in 2007, many economists believe the region is more or less isolated from a world recession shock.

And with $150bn worth of projects in the country, Qatar’s future looks far from bleak, provided inflation issues are actively addressed. “I believe that by the year 2020, Qatar will have the same level of education system as Singapore, the same cosmopolitan feel as London and a financial hot spot like Hong Kong,” said Maratheftis.

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Thursday, January 24- 2008 @ 21:21 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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