Qatar's forecast 10.5% average population growth for 2014 will be one of the world's highest rates, QNB said in a report.
Qatar's population grew by 10.4% year-on-year in February to reach 2.12m. Population growth in recent months has been driven up by the large ramp up in infrastructure spending, in preparation for the 2022 FIFA World Cup.
"In turn the larger population will feed into higher economic growth by boosting aggregate demand and investment in housing and services," QNB said.
The bank's economists expect the further expected acceleration in population growth to drive consumer demand, leading to a "modest rise" in inflation.
Indeed, planned heavy investments in major projects in 2014 are likely to accelerate economic growth, which could lead to certain supply bottlenecks, pushing up prices somewhat, QNB said.
Qatar's Consumer Price Index (CPI) for January 2014 rose by only 2.3% year-on-year, the lowest level since August 2012.
On a month-on-month bases, it rose 0.3% as compared to December 2013. Lower international food prices were the key factor behind the slowdown, falling 0.7% month-on-month (1.6% year-on-year, which is the slowest rate of increase since August 2010).
Housing and rents (the largest weight of overall inflation with a 32.2% share) rose 1% month-on-month but was steady at 2.8% year-on-year in January 2014.
Rent inflation has slowed in recent months in line with QNB projections, tracking movements in the underlying price of land.
However, a recovery in land prices between December and February could reverse the slowdown in rent inflation by mid-2014.
QNB Group has analysed data purely on land transactions in Qatar, based on weekly statistics published by the Ministry of Justice. Land prices are a fundamental driver of rents in Qatar with a six-month lag.
Falling land prices in the second-half of 2013 are likely to slow rent inflation over the next few months. However, this is expected to come to an end by mid-2014, when rental inflation is likely to accelerate again.
"Overall, we expect inflation to pick up to 3.8% in 2014," QNB said.
© Gulf Times 2014
