Lower housing, fuel costs spur Qatar's deflation

Doha: Qatari consumer prices fell in July for the seventh consecutive month this year on lower housing and fuel costs in the world's largest exporter of liquefied natural gas.

Consumer prices declined 2.9 per cent in July, compared with a 2.8 per cent fall in June, the Qatar Statistics Authority said on its website yesterday.

Rent, fuel and energy prices declined 15.3 per cent in July, compared with the same month last year, the data showed.

"They have one of the fastest growing economies but they also have one of the fastest deflating economies," said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.

"I don't think it creates any structural impediments to the economy."

Qatar cut its overnight deposit rate by half a percentage point to 1.5 per cent on August 11, a move prompted by domestic deflation and low global borrowing costs, the central bank said.

The rate was last reduced in May 2008 when Qatar trimmed it by a quarter point to 2 per cent.

Qatar, which had an inflation rate as high as 15 per cent in 2008, predicts prices will rise 1 per cent this year.

Energy driver

The International Monetary Fund forecasts that Qatar's economy will increase 19 per cent this year, faster than any other economy and double the country's growth rate for 2009.

Energy wealth helped Qatar's economy triple in size since 2004.

The Qatar Statistics Authority also shifted the base year for its consumer price index to 2007 from 2006, according to the authority's statement yesterday.

The move was meant to comply with a recommendation by the Gulf Cooperation Council for members to use 2007 as the base year.