The Consumer Price Index is used to measure the purchasing power of the consumers in a particular country (Turvey, 2004). It shows the changes in the price levels of goods and services purchased by the households of the country. Calculation of the Consumer Price Index involves averaging the price changes for the items in the predetermined basket of goods and services. These items bear different weights according to their importance to the consumer. The chosen basket of goods and services varies with the country. Also, the weights of the items are varied from one country to another, although, in many countries highest, weights are given to the food, medical care, housing, and transportation, clothing and household equipment (Turvey, 2004). In Qatar, the Consumer Price Index is calculated with the main components being: rent, fuel and energy which take proportion of 32.2%, communication and transport accounts for 20.5% of the Consumer Price Index, tobacco, beverages and food accounts for 13.2%, culture. Recreation and entertainment accounts for 10.9%. Other components contributing to CPI calculation in Qatar are home appliances, textiles and furniture which accounts for 8.2%, 7.2% is accounted for by miscellaneous goods and services, footwear and garments accounts for 5.8% and finally medical services and medical care accounts for 2%. The above information is presented in the table below;

Consumer Price Index Component   Percentage

Rent, fuel and energy   32.2%

communication and transport   20.5%

tobacco, beverages and food   13.2%

recreation and entertainment   10.9%

home appliances, textiles and furniture   8.2%

miscellaneous goods and services   7.2%

footwear and garments   5.8%

medical services and medical care   2.0%

The Qatar CPI showed a consistent increase each year from the year 2000 to 2013. This is shown in the table below;

Year     (Index, Base Year 2000 = 100)

2000   139.315

2001   141.316

2002   141.66

2003   144.866

2004   154.713

2005   168.349

2006   188.262

2007   214.174

2008   246.405

2009   234.418

2010   228.714

2011   233.113

2012   237.439

2013   244.6

Source: Economy watch

The above table shows the CPI for Qatar from 2000 and 2013. It shows that the CPI increased over the first eight consecutive years, then dropped in the next two years and later increased.

The table below shows percentage change in the Consumer Price Index per year, taking year 2000 as the base year;

Year     (Index, Base Year 2000 = 100)   Percentage change in CPI

2000   139.315

2001   141.316   1.44%

2002   141.66   1.68%

2003   144.866   3.98%

2004   154.713   11.05%

2005   168.349   20.84%

2006   188.262   35.13%

2007   214.174   53.73%

2008   246.405   76.87%

2009   234.418   68.26%

2010   228.714   64.17%

2011   233.113   67.33%

2012   237.439   70.43%

2013   244.6   75.57%

Source: Economy watch

From the above table, the percentage change in the CPI is 1.44% in 2001 which is our first year in this study. The CPI’s percentage change remains a single digit for the first three years and later increases to a two digit figure in the year 2004. Then, an increase in the percentage change increases rapidly for the next three years to the highest value of 76.87% in our study. This was year 2008. In 2009 and 2010 the percentage change in the CPI decreased consecutively and later started to increase up to 75.57% in 2013. The rate of change calculated above uses the following formula;

Percentage change in CPI   =   {(CPI1-CPI0)/ CPI0}*100%

Where; CPI1,   represents the CPI for the current year

CPI0,   represents the CPI for the base year (year 2000 in our study)

Factors that influenced the above trend of the rate of change in the CPI

It has been noted that increase in house rents mainly caused the rapid increase in the rate of change of the cpi The house rents increased since there was an increased demand for housing. This increase in demand for housing was brought about by an increase in the population.

The rapid increase in the rate of CPI in the year 2006 to a two digit figure was due to an increase in the cost of imports from the European Union as the value of Qatari rayal dropped against the Euro.

Another factor was the building boom for the Asian Games. As a general construction was done in Qatar to host these games, the country experienced an increase in inflation in 2008. This came up since Qatar was having problems in importing enough building materials into the country. There were also logistical bottlenecks.

In 2009 and 2010, Qatar experienced a sudden decrease in inflation rates. There was indeed a deflation despite the global financial crisis. The major reason for this was because housing rental prices decreased. This shows that Qatar is very sensitive to global financial trends.

In 2011, the inflation is seen to increase rapidly. The major cause of this was the increased government spending on social welfare during this year. The government of Qatar is increased the basic salaries and social benefits for state civilian employees by 60% in September 2011.

The inflation doesn’t seem to increase rapidly after 2011. This is because the government decided to delay infrastructure projects by slowing down the awarding of contracts to the winners of those contracts. This disappoints foreign investors thus limiting price increases. In fact, the chief economist in Doha asserts that, “the two year delay had the effect of controlling inflation”.

Comparison of Qatar’s CPI with another country’s CPI; Kuwait is as below;

Year   Qatar CPI (Index, Base Year 2000 = 100)   Kuwait CPI (Index, Base Year 2000 = 100)

2000   139.315   105.328

2001   141.316   106.854

2002   141.66   107.705

2003   144.866   108.767

2004   154.713   110.134

2005   168.349   114.672

2006   188.262   118.218

2007   214.174   124.678

2008   246.405   137.921

2009   234.418   143.372

2010   228.714   149.12

2011   233.113   156.199

2012   237.439   160.768

2013   244.6   166.116

Source: Economy watch

Table shows the CPI’s for Qatar and Kuwait. It shows that Kuwait’s CPI increased throughout the period. It can also be observed that there was a sudden increase in the CPI in Kuwait as it is in Qatar. This is so since Kuwait is also a country within the Gulf Cooperation Council region; this is according to Gulf One investment Bank Research Bullettin (2013). However, the 2009 and 2010 global crisis did not favor Kuwait as it did to Qatar.

Recommendations

From the above analysis, it is evident that the component rent, fuel and energy is a crucial determining factor of the overall inflation rate in the Qatar’s economy. The government should employ the relevant measures to ensure that this component of the Consumer Price Index has its prices kept stable. This can be done by ensuring that the citizens are provided by affordable rental houses specially constructed by the government. In order to keep this goal alive for a significant period of time, the government should construct rental houses in a rate that is guided by the population increase patterns.

Conclusion

The study aimed at examining the Consumer Price Index of Qatar for the period between year 2000 and 2013. The basket of goods and services used in the construction of the Consumer Price Index in Qatar is defined, and it shows that the component rent, fuel and energy has the highest percentage in CPI determination. The CPI data obtained from the Economy Watch website shows an increasing trend of the CPI at first, then a decrease in the years 2009 and 2010 and a continued increase later. The study finds out that the sudden increase in the CPI was mainly caused by the increased prices of rental houses that were brought about by the increased demand for rental houses caused by the then population increase. Other causes of inflation were found out to be an increase in government spending, decrease in the value of Qatari rayan against the Euro among others. However, the global financial crisis was found to reduce inflation in Qatar’s economy, in 2009 and 2010. The study went ahead to compare Qatar’s economy with that of Kuwait, a country in the Gulf Cooperation Council region. The study found that Kuwait’s CPI increased continuously to the extent of surpassing that of Qatar. Despite the favourable global financial crisis to Qatar, Kuwait did not experience a decrease in inflation. Finally, using the obtained information on the weight given to the rent, energy and fuel component, the study recommends construction of affordable rental houses by the government in combat of inflation.