Food pushes inflation to near record

y Santhosh V Perumal
COSTLIER FOOD – along with higher rent, air fares, medical expenses and gold prices – drove Qatar’s inflation to a near record high of 14.75% year-on-year in the first quarter.
Indicating the extent of the global crisis, food prices rose substantially faster than rents, where growth was seen as rather slower.
The inflation rate, albeit slightly moderated from 14.82% in Q1 2007, comes despite the government’s efforts to bring it down to a target of 6-7%. The Qatari riyal’s fixed parity with the dollar is seen as one of the main reasons for high price levels.
Ibrahim al-Ibrahim, economic adviser to HH the Emir Sheikh Hamad bin Khalifa al-Thani, speaking to Reuters, said: “Things are not getting better and action should be taken”, when asked about his views on the currency peg.
His statement overshadowed the visit of US Treasury Secretary Henry Paulson’s to Saudi Arabia, Qatar and the UAE where he defended the dollar’s status as the world’s reserve currency.
According to Hany Genena, senior economist with Gulf Finance House, given the increase in inflation in the GCC, it was likely that the Gulf states would review their currency pegs in the second half of this year.
The consumer price index for household consumption stood at 166.87 in January-March this year compared with 145.42 points in the same quarter of 2007, according to General Secretariat for Development Planning (GSDP) data.
The price level rose by 4.73% (Q1 2008) from 159.34 points in the last quarter of 2007.
Food, beverages and tobacco index rose by 18.53% in the first quarter of this year compared with the level in the same period of 2007 mainly due to costlier food, meat, fruits and vegetables. In Q1 2007, the index had risen by only 6.31%.
“The increase (in the index of food, beverages and tobacco in Q1 2008) could be attributed to the rise of international food prices,” said GSDP, adding that on a quarterly basis, the group’s index was up 7.81%.
Food prices rose by 19.32% against 6.12% in Q1 2007; bread and cereals by 14.67% (-2.95%); meat by 30.73% (3.59%); milk, its products and egg by 17.35% (7.46%); oils and fats by 16.36% (-3.72%); fruits and vegetables by 19.43% (9.32%); sugar and sugar products by 9.73% (8.65%) and tea, coffee and cocoa by 6.35% (5.21%).
However, fish and seafood prices moderated to 12.07% compared with 14.35% in Q1 2007 and potato and other tubers to 17.7% (21.08%).
Last week, the United Nations’ Food and Agricultural Organisation issued a report showing that high food prices have particularly hit vulnerable populations in many countries.
The index of rent, fuel and energy, constituting more than 20% of household expenditure, rose by 22.49% year-on-year in the first quarter solely due to rents for dwelling as there were no changes in the sub indices of electrical power and fuels.
The group had risen by 35% year-on-year in Q1 2007; while on a quarterly basis, the increase was 4.76%, thus showing a moderation in rents, apparently reflecting the effectiveness of 10% cap imposed by the State last year.
The index for miscellaneous goods and services rose by 8.17% in Q1 2008 basically due to the increase in gold prices. The group had risen only by 4.93% in the first quarter of 2007.
The index for transport and communications was up 5.86% in the first three months of this year mainly on costlier air fares and land transport, which rose by 14.73% and 19.7%, respectively.
The index had risen only by 2.55%, while that of air and land transport rose by 3.2% and 2.59% respectively in Q1 2007. The steep rise in aviation fuel was the cause of high air fares.
Medical care and medical services’ group index rose by 3.55% in Q1 this year on costlier dentists’ and doctors’ services as well as medical services outside the hospitals. In the first three months of 2007, the group index had risen by only 0.23%.
Dentists’ services became costlier by 12.17% compared with 3.6% in Q1 2007; doctors’ services by 6% (-5.66%) and medical services outside hospital by 8.49% (0.06%).
Furniture, textiles and home appliances’ group index rose by 6.90% in the first three months of this year compared with 4.21% in the corresponding quarter of 2007.
The index for entertainment, recreation and culture rose by 7.31% in Q1 2008 against 5.11% in the same quarter of previous year.
However, the index of garments and footwear moderated to 11.29% in the first three months of this year compared with 12.77% in the year-ago period.
The Gulf economies should not wait for a long-term US fix out of the
shadows of rock-bottom interest rates because they need all the help they can get today in the fight against inflation. -- Viewpoint

source-Gulf-Times
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