Prices of food in Qatar rose by 4.5% in July due to Arab boycott

Food and beverage prices climbed 4.5 percent in July from a year earlier – their fastest rate of increase since at least 2014, and accelerating from a rise of 2.4 percent in June, due to the measures imposed by the Arab quartet, which consists of Saudi Arabia, the United Arab Emirates, Bahrain and Egypt.

Food and beverage prices gained 4.2 percent from the previous month. Many dairy products and other perishable foods used to be imported across the Saudi border; they are now having to be flown or shipped in across longer distances.

Prices of non-perishable goods such as clothing, shoes, furniture and household appliances fell in July.

However, housing and utility prices sank 3.6 percent from a year ago in July, their biggest drop for at least several years, and slipped 0.6 percent from the previous month. They began falling early this year and dropped 2.9 percent from a year ago in June.

Saudi, UAE and Bahraini banks have begun pulling deposits and loans from Qatar, tightening liquidity in the banking sector, while there is anecdotal evidence of citizens from the three countries offering real estate investments for sale – bad news for Qatar’s property market.

Official figures for building permits issued in the two-month period of June and July do not show a change in trend, but there is a lag between applications for permits and approvals, so the impact of the sanctions may be felt later. Some builders which have received permits could choose to delay executing projects.

In this context, the annual inflation rate fell back sharply to 0.2 percent in July. It had spiked to 0.8 percent in June from 0.1 percent in May after the Arab quartet cut diplomatic and transport ties with Qatar on June 5, accusing it of supporting terrorism.

By closing Qatar’s land border with Saudi Arabia and disrupting maritime shipping routes, the sanctions slashed Qatari imports by more than a third in June, pushed up prices of some basic goods and hurt business sentiment in Doha.