Mar

26

Gulf States to See 7% Inflation in 2008: IMF

Filed Under Finance | Posted By Jennifer Sullivan |

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The six Gulf states, currently rolling under the assault of mounting prices although oil earnings going up stridently, will be disturbed by inflation in 2008.

Largely inflationary pressures this year are likely to boost by seven percent on an average, said Gene Leone, a senior official of the International Monetary Funds (IMFs).

Leone says, “Domestic demand was expected to remain strong over the medium term, fuelled by high oil prices and flow of substantial investments in the region.”

Inflation was expected to ease to approximately12 percent and eight percent in 2007 in Qatar and the UAE. However, figures offered by Leon reveals that inflation in Qatar surged to around 14 percent while prices in the UAE had risen by 11 percent.

With near four percent inflation in Bahrain, lowest among GCC countries, owing to government subsidies, the IMF said.

In his presentation, Leon mentioned that in Qatar inflation has surged to around 14 percent in 2007 while consumer prices in the UAE were estimated to have risen to around 11 percent.

About the policy options, Leon said that given the pegged exchange rate regimes in most GCC countries, the effectiveness of monetary policy is limited in controlling inflation. However, fiscal policy is the only effective instrument to tackle this issue.

He added that revaluation of the exchange rate could have a limited impact, but we should bear in mind that inflation has been stimulated mainly by supply-side factors and choosing effective regime should be motivated by more than just the need to lessen inflation, he said.

The IMF figures also explain inflation rising over 4.1 per cent in the low economy of Saudi Arabia, which is the largest in the Middle East.

Meanwhile, Bahrain has proposed an agreement to import foodstuff and supplies to fight with the impact of rising inflation.

Bahrain Chamber of Commerce and Industry (BCCI) chairman Esam Fakhro says, “the policy would help give the region`s countries more control over the cost of consumer goods and greater power to prevent harmful price hikes”.



Tags: , ,




Leave a Trackback

AddThis Social Bookmark Button


Comments

Leave a Reply