After a year of rent increases and rising inflation, Qatar residents may be cheered to hear that the country’s cost of living is forecast to remain relatively steady in 2015.
A review of official government figures shows that inflation rose to its highest point of 2.8 percent in August, before leveling off to 3 percent toward the end of the year.
The main driver for inflation were increases in the cost of rental accommodation, domestic fuel and energy, which accelerated for 10 consecutive months, from 4.8 percent in January to a peak of 8.2 percent by October.
But according to the latest figures published by the Ministry of Development, Planning and Statistics (MDPS), the increases in rental costs steadied to 7.6 percent by November 2014.
The figure is slightly higher than the 7 percent that Qatar National Bank predicted for rent increases by the end of 2014, according to its Qatar Economic Insight report released in September.
But overall, the rising rental costs is in line with the bank’s predictions.
It said that the ongoing population hike, coupled with increased land prices, would result in overall increases in the cost of rent through the latter half of 2014.
There is generally a lag of about six months before land price rises affect costs for consumers renting homes.
QNB has predicted that hikes in rent would continue for the next two years, but the pace of growth is expected to slow. By the end of 2016, the bank expects the figure to stand at around 8.5 percent.
Rent makes up about one third of the average expat family’s monthly spend, and likewise accounts for a third of the Consumer Price Index (CPI).
The CPI is a measurement of cost of living and charts the change in real-time prices of a “basket” of common consumer goods and services compared to the same month the previous year.
The prices increases seen in 2014 have severely impacted the amount of money left for leisure and savings, many residents have said.
Fortunately, inflation has been slowing down since September. According to the MDPS, the CPI figures for October and November 2014 stood at 3 percent.
If the December figure, which hasn’t yet been released, remains at a similar level, then the inflation rate will be marginally less than what’s been forecast by the International Monetary Fund (IMF).
In its World Economic Outlook report last October, the IMF forecast that Qatar’s CPI would rise and stand at 3.4 percent by the end of 2014, which would be the highest in the region.
However, the body said that 2015 would be a steadier year, which would end with a CPI of around 3.5 percent. QNB forecast a similar figure for inflation by the end of this year.
Samba Financial Group also holds a similar forecast, predicting “moderate inflation of 4 percent in 2015.” This would be driven by strong demographics and the sheer number of major infrastructure projects underway.
Still, international factors such as a slow-down in investment in China could stop prices from going up, the report added.
Another factor that could help keep the daily cost of living in check here are food prices.
Earlier this summer, QNB said that falling food costs, due to bountiful harvests, are pushing down global food prices. In a country like Qatar, which imports more than 90 percent of its foodstuffs, this is good news.
“Since the country has virtually no domestic food production, lower international food prices are likely to continue to push Qatar’s food prices lower for the foreseeable future, albeit with a lag. This means that Qatar’s inflation should remain moderate at around 3.5% at least until the end of 2015,” the report added.