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QCB Governor H E Sheikh Abdullah Saoud Al Thani
DOHA: The Qatar Central Bank (QCB) will make sure that the country’s booming real estate sector is not exerting any significant pressure on the headline inflation rate.
The QCB Governor H E Sheikh Abdullah Saoud Al Thani noted that the demand-supply imbalance in the housing market will be corrected before rental prices exert any major pressure on inflation over the medium term.
“As of now, we do not see any significant upside risk to the inflation scenario in 2013. With prospects of weaker global commodity prices and a firmer US dollar, headline inflation is expected to stay benign in 2013 due to the persistence of excess supply in the real estate sector. As infrastructure related construction activities picks up and the expatriate labour force increase, the demand-supply imbalance has to be corrected”, the QCB Governor told specialised banking magazine Banker Middle East in an interview.
On Qatari banking sectors’ reported expansion plans Sheikh Abdullah said: “After moderation of growth in credit demand from the private sector in 2010, the year 2011 witnessed a pickup in private sector credit, even though it has lagged behind the credit growth witnessed in the public sector. Although credit growth was somewhat lackluster in 2012, it appears that with the peaking of hydrocarbon output, credit growth will rebound. “
Sheikh Abdullah noted that the future drivers of Qatar’s growth are likely to come from sectors like healthcare, education and services. This means Qatar’s economy is well on the path to diversification. Amidst these dynamic developments, banks would need to be proactive to improve their risk management skills, in order to cope up with the challenges of financing large-scale projects.
He said the QCB is working on to develop a local debt market that would enhance options for domestic financing and reduce reliance on foreign funding. A strong domestic debt markets can bring in important benefits, including rising funding for the large infrastructure investment programme as Qatar advances its diversification agenda.
A broader market participation through a diversified set of professional institutional investors such as investment funds, pension funds and insurance companies will help secondary market development. QCB is also taking the lead in setting up a domestic credit rating agency and a central securities depository as steps toward further developing the debt market.
Speaking on Qatar’s interest rates, he said the country’s current interest rate structure is appropriate. On the issue of “hot money”, he said Qatar has taken several measures since 2011 which has largely insulated the financial system form speculative capital flows. “We continue to monitor the developments and would take appropriate action, if necessary.”