Inflation, property fears colour outlook

Qatar's gas is fuelling the region's most impressive rate of economic expansion, but analysts remain concerned about the outlook for other sectors and the potential for inflation. Real GDP grew 8 per cent last year and is expected to expand by 16 per cent this year, government forecasts show. "The real GDP growth ranks the highest in the neighbourhood, primarily because of these gas projects coming on stream," says MR Raghu, the head of research at Kuwait Financial Centre. "They will continue to grow at this rate for some time to come."

But the property sector remains a weak point after a collapse in prices last year. The government has not offered official estimates on the extent of the downturn, but a survey of property brokers in January by The National found prices were down by between 20 and 60 per cent last year. Bank of America Merrill Lynch warned in a recent report that the outlook was not likely to improve. Qatar's industrial projects require a relatively small workforce to keep them running, and by 2012, when construction on the last big projects is completed, departing expatriates could leave the country with an oversupply of property.

Economists also remain concerned about economic growth exceeding the infrastructure and constraints of the country. Inflation is expected to increase by only 1 per cent this year, but could rise swiftly in the future, the IMF said in a recent report. "The projected high medium-term growth rates have the potential of overheating the economy unless the government continues to prioritise and sequence its spending towards infrastructure projects," the IMF analysts wrote.

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