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Sanctions push Qatar inflation up only modestly in June

The Doha Skyline at the Sheraton Grand Hotel on November 17, 2016 in Doha, Qatar.
Photo by Mark Runnacles | Getty Images

Sanctions imposed by Arab states pushed Qatar's inflation rate up only modestly in June, official data showed on Thursday, suggesting Doha is having considerable success in limiting economic
damage caused by its diplomatic crisis.

Annual consumer price inflation rose to 0.8 percent last month from 0.1 percent in May, and remained far below a rate of 2.5 percent recorded in June 2016. Consumer prices increased 0.7 percent month-on-month in June this year.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Qatar on June 5, accusing it of supporting terrorism, which Doha denies. This raised costs for Qatar by forcing it to arrange new shipping links via Oman and Kuwait for many imports.

Particularly costly was the closure of Qatar's land border with Saudi Arabia, across which flowed many of its imports of dairy products and construction supplies.

The sanctions have had the biggest impact on food prices. Food and beverage costs climbed 2.4 percent from a year earlier and 2.5 percent month-on-month in June; they had previously been in a downtrend, dropping 1.9 percent year-on-year in May.

In a report on Qatar published on Thursday, Human Rights Watch said that of 70 foreign workers whom it interviewed around Doha, nearly all complained about a rise in food prices due to higher import costs with the closure of the land border.

Thursday's official data indicated, however, that food prices rises remained far below levels which could trigger an upward spiral of overall inflation.

A Qatar government official told Reuters the government had largely covered the increased shipping costs into the country, limiting the impact on consumers.

Also, the government imposes routine price caps on some essential goods during the holy month of Ramadan, which this year fell mostly during June. These caps, and steps in past years to deter hoarding and price manipulation among retailers, probably limited inflation.

Transport costs jumped 8.9 percent from a year earlier in June, but this was due not to the sanctions but to rises in domestic fuel prices earlier this year.

Housing and utility costs dropped 2.9 percent from a year ago.

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