In a clear sign of swelling expatriate numbers, remittances from Qatar may have hit $13.8bn in 2013, up 221% on 2008, Samba Financial Group said citing an IMF estimate.
Qatar’s population expanded to 12% year-on-year in November 2013, from some 10% in the preceding eight months, as the country sucked in ever greater numbers of expatriate workers to build the swathe of ongoing and planned infrastructure projects.
A large (though undefined) portion of them are construction workers who will remain largely confined to labour camps, spending little and remitting most of their wages. Other, more senior expatriates will integrate more fully into the local economy and this will continue to provide a strong impetus to consumption growth over the medium term, Samba said in its latest economic monitor.
“This dynamic may weaken once the World Cup is completed, but the infrastructure spending associated with the National Development Strategy (NDS) should provide a decent underpinning for renewed expatriate inflows in the years beyond 2022. Overall, this should help to boost domestic demand and rebalance the economy away from exports and investment towards consumption, in line with the NDS,” Samba said.
“Qatar’s influx of expatriates is not all good news however,” Samba noted.
Inflation is the most obvious pressure point. Consumer prices are currently growing at a manageable 2.8%, but it is notable that rents (the single largest component of the CPI) are rising at a 6% pace. This trend seems likely to accelerate over the next few years as more pre-World Cup expatriates are attracted to the country, putting pressure on the existing housing stock.
This trend will be partly mitigated by reduced government demand for land, since most infrastructure projects are now in the construction phase (house prices - as distinct from rents - actually fell by 6% from May to September) and a sizeable house building programme.
The other main element of inflation is external. Qatar imports virtually all of its food and consumer goods, so the change in global commodities prices will have a direct bearing on the CPI, it said.
“We believe the dollar will strengthen over the next year or two, largely thanks to the withdrawal of quantitative easing and a comparatively strong US economic and fiscal performance. With the Qatari riyal remaining pegged to the dollar, this should keep a lid on import prices and confine the overall pick up in Qatari inflation to under 4%,” Samba said.
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