VZCZCXRO2820
RR RUEHDE RUEHDIR
DE RUEHDO #0349/01 1220650
ZNR UUUUU ZZH
R 010650Z MAY 08
FM AMEMBASSY DOHA
TO RUEHC/SECSTATE WASHDC 7888
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE

UNCLAS SECTION 01 OF 02 DOHA 000349 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EEB/TPP/ABT/ATP JANET SPECK 
 
E.O. 12958: N/A 
TAGS: EAGR TBIO ECON QA
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - 
QATAR 
 
REF: STATE 39410 
 
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SUMMARY 
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¶1. Prices of all food/agricultural commodities are 
dramatically rising in Qatar.  Analysts and businessmen 
attribute the price increases to a variety of factors, 
including higher prices in the countries of origin, higher 
transportation costs, salary and wage increases, and 
inflation.  At the same time, many consumers accuse merchants 
of exploiting the situation.  Supplies of these commodities 
have remained stable, and there have been no demnsratable 
shifts in consumers' attitudes or signiicant political or 
economic impacts.  One definie outcome is higher inflation, 
and the Governmen of Qatar so far has done little to 
constrain riing market prices.  End Summary. 
 
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Demand and Supply 
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¶2. Prces of all food commodities have risen dramatically in 
Qatar in recent months.  Some of the most important and 
essential commodities affected are rie (100 percent), 
cooking oil (19 percent), meat 12 percent), dried milk (20 
percent), and all kinds of vegetables and fruits (100-150 
percent).  Qatar is a net importer of food commodities with 
very little domestic production.  Increasing prices are 
affecting expatriates in addition to relatively wealthy 
Qatari citizens.  Increasing numbers of residents are 
traveling to neighboring Saudi Arabia to purchase food items. 
 Price rises have not significantly affected the supply of 
food commodities, nor have there been remarkable shifts in 
consumers' attitudes and behavior.  Store managers and 
vegetable and fruit vendors told Econoff they were still 
selling virtually the same variety and quantity of 
foodstuffs. 
 
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Political Impact of Rising Food Prices 
-------------------------------------- 
 
¶3. No public protests or violence occurred in response to 
rising food price rises.  But the situation prompted wide 
press coverage and a nation-wide outcry from municipal 
council members and regular citizens for the government to 
take urgent measures to constrain prices.  Skyrocketing food 
prices also prompted a prominent Islamic scholar, Dr. Yousuf 
Al Qaradawi, to call publicly on the government to control 
prices of basic commodities.  Qatar does not regulate imports 
of biotech crops or foods containing biotech ingredients, nor 
does it produce biotech crops.  Qatar established a biosafety 
committee last year to address biotech concerns. 
 
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Economic Impact 
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¶4. Rising food prices will have no significant economic 
impact on wealthy Qatar's broader economic prospects. 
Despite inflationary pressures and a newly enacted 
expansionary budget that will further feed inflation, the 
outlook for the Qatari economy remains positive.  GDP growth 
is projected at 15.5% (USD 73.7 billion) in 2008.  Trade 
balance surpluses reached USD 17.6 billion in 2006, an 
increase of 12.2% over 2005.  Given rapidly expanding energy 
production and soaring oil prices, Qatar's trade surplus is 
expected to grow further.  Rising food prices, however, will 
definitely feed inflation. 
 
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Factors Behind Price Increases 
------------------------------ 
 
¶5. Analysts and businessmen attribute the sharp rise in food 
commodities prices to a variety of factors, including rising 
international prices of food and agricultural commodities, 
higher transportation costs, and double-digit inflation in 
Qatar due to a number of recent wage and salary hikes in 
response to high inflation.  Many consumers also accuse 
"greedy merchants" of exploiting the situation. 
 
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Government Policy Response 
-------------------------- 
 
¶6. Despite a stated government policy of trying to ease the 
negative impact of inflation in general and food rising 
 
DOHA 00000349  002 OF 002 
 
 
prices in particular, the only measure Qatar has taken so far 
is a decision to increase the subsidies for the flour used in 
making bread.  Despite a 20 percent decrease in the price of 
flour thanks to the higher subsidies, the selling price of 
bread in the market remains unchanged.  Qatari officials have 
expressed the government's intent to subsidize still more 
food commodities in the near term, but no details have so far 
been released.  The government also launched a new service on 
the Ministry of Economy and Commerce's website called "Where 
to Buy," which lists shopping malls and stores offering the 
lowest prices in the hope that this will encourage other 
vendors to lower their prices.  Qatar participated in a 
recent meeting of Gulf Cooperation Council countries at the 
undersecretary level addressing rising prices for food and 
essential commodities.  The meeting produced recommendations 
aimed at encouraging the private sector to invest in food 
production, especially in other countries that have high 
comparative advantages in food production.  The 
recommendations are expected to be discussed further at a 
ministerial level next month. 
 
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Comment 
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¶7. Increasing food and agricultural commodity prices in Qatar 
are not expected to push residents into poverty or cause 
significant hunger; nor will they significantly affect the 
balance of payments of this increasingly wealthy country. 
However, additional price hikes will further feed inflation 
and force the country's private sector to face the growing 
challenge of how to keep its expatriate workforce from 
leaving the country, faced as it is with a steadily 
increasing cost of living.  One possible outcome is that 
consumers are more willing to consider buying genetically 
modified products, if offered at a lower price, in the 
current highly inflationary environment. 
RATNEY