(MENAFN- The Peninsula) Qatar's food prices are projected to increase only marginally this year before recovering in the following two years, rising around 2.0 percent to 2.6 percent.
The consumer price index (CPI) inflation has been easing in recent months. The latest reading registered 1.4 percent in June, down from the 3.8 percent peak in August 2014.
The decline has been broad-based across all components of CPI, but low food price inflation has played an important role in the recent downward trend, QNB noted in its yesterday's 'economic commentary'.
The decline in domestic food price inflation has been driven by the fall in international food prices since 2012.
But global food prices are expected to bottom out this year on a pick-up in growth and a recovery in oil prices.
As a result, Qatar's food prices are projected to increase only marginally in 2015, QNB analysts said.
Citing latest IMF data, they said global growth is expected to rise to around 3.8 percent in 2016-17. And oil prices are expected to reach a bottom in 2015 before rebounding later as investment cuts among the US shale-oil producers begin to impact supply.
Consequently, the World Bank expects global food prices to decline by 9.8 percent in 2015 before picking up 0.8 percent in 2016-17.
Working out the current large stocks should ensure that the initial rise in food prices will remain moderate. "The outlook for international food prices has implications for Qatar, which imports most of its food from abroad. This means that the food component of CPI in Qatar, which has a weight of 12.6 percent in the CPI basket, is closely linked to the World Bank food price index.
"If the historical relationship between domestic and international prices persists, then we forecast that domestic food prices should rise only slightly in 2015 (0.2 percent) before picking up in 2016 (2.1 percent) and 2017 (2.6 percent)."
While food prices in Qatar are closely linked to global prices, there are factors which prevent the full transmission of international prices into the domestic economy. These factors include transportation, manufacturing and retailing costs and domestic policies limiting price increases on staple foods. These factors have been incorporated into our forecasts.
QNB's outlook for Qatar's food prices can be subject to surprises. Most notably, weather surprises carry the biggest uncertainty and can lead to a significant deviation from the World Bank's forecasts of international food prices.
"Food prices are expected to create a progressively more upward pressure on Qatar's inflation. However, the risk of a breakaway inflation in Qatar is low given the large disinflationary pressures in the domestic components of CPI, especially housing. Qatar's inflation should therefore remain moderate over the medium term."
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.