MANAMA: The Gulf Cooperation Council (GCC) countries must decide how to tackle inflation which has already edged to 14 percent in some countries. There is a question as to which is the lesser evil for the GCC — to restore the people’s purchasing power and make a new start or take a hit on the value of dollar-denominated foreign assets held by GCC investors. Rising inflation has become a critical issue for consumers, businesses and policymakers in the whole GCC region.
In the GCC, inflation has also been exacerbated by two other factors: A falling dollar driving up imported inflation and “temporary” supply scarcity driving up food, commodity, property and rental prices. Inflation is a natural product of the liquidity-driven economic boom that the GCC is currently enjoying.
Recent reports put consumer-price inflation at around 14 percent in Qatar and 11 percent in the United Arab Emirates. “We expect the numbers to remain high this year as well (12 percent in Qatar, 9 percent in the UAE),” Al-Khaliji report said. This compares with average inflation rates below 5 per cent until five years ago.