"Our 2025 average inflation forecast remains at 1.6%, up from 1.1% last year. Survey data suggest inflation was mild in January, as firms absorb rising input costs rather than pass them on to consumers as they prioritise increasing sales volume," said the ICAEW report, prepared by Oxford Economics.
According to the latest Article IV report on the country, the International Monetary Fund had said Qatar's headline inflation will likely ease to 1% in 2024 and converge to around 2% over the medium term.
The ICAEW report said policy easing by the Qatar Central Bank (QCB) will now be slower, as it thinks the US Federal Reserve will hold policy steady until December, when it expects a 25 bps (basis points) rate cut. "This is down from our previous forecast of three rate cuts this year," it added.
The IMF had said inflation (in Qatar) declined from 5% in 2022 to 3% in 2023 (period average). It decelerated further to 1.2% in 2024 through October as rent and recreation services inflation weakened. Producer price and wage inflation remained contained.
Forecasting that the aggregate GCC (Gulf Co-operation Council) inflation projection for 2025 remains at 2.3%; ICAEW said "we see inflation stabilising around 2% in the medium-term".
Recent readings show inflation is below 1% in Bahrain, Oman and Qatar, while in Saudi Arabia, the region’s largest economy, inflation averaged 1.7% in 2024, driven almost exclusively by upward pressure from housing rents.
Housing prices are also pushing inflation up in Dubai, where inflation readings have hovered around 3%, but this is offset but much lower readings in other emirates. At 2.9%, Kuwait had the highest inflation rate in the region in 2024.
Inflation in Bahrain has remained low, averaging 0.9% in 2024, with prices of food and restaurant hotels being the key driver of upward pressure, ICAEW said, adding "we think prices will rise to 2.8% this year, which may hinder consumer spending, before stabilising around 2% in the medium-term."
Finding that policy easing by GCC central banks will now slow against the backdrop of US dollar-pegged currencies; the report said the US Federal Reserve delivered a cumulative 100bps of cuts in 2024 before pausing in January and "we now think it will hold policy steady until December, when we expect a 25 bps rate cut."
Consequently, the recent pick-up in lending growth may lose momentum in the near-term, albeit remaining supportive for non-energy sector growth, it added.
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