By Andy Sambidge
Gulf state's central bank says bad loans at low levels, but concern remains over inflation
Qatar's banking sector are well positioned to deal with any unforeseen crises but rising inflation could become a "major concern" in the future, a new report has said.
A sharp escalation in global commodity prices and rising domestic non-rent inflation pressures are seen as the main challenges to the economy, the Gulf state's central bank said.
In its latest financial stability report, it said the financial system in Qatar continued to expand "at a fast clip", following a brief period of uncertainty in the aftermath of the global financial meltdown.
"The macroeconomic fundamentals are robust, with high growth in real GDP driving economic activity across various sectors," the report said.
Last week, the Qatar Statistics Authority said annual consumer price inflation in the country rose to 2.2 percent in September because of a jump in food costs, reaching its highest level since at least the beginning of 2010.
The inflation rate climbed from 2.1 percent in August, continuing this year's uptrend from 1.6 percent in January.
The central bank report said the banking sector remained strong, profitable and liquid, with low levels of delinquent loans.
"Banks are well-provisioned to withstand unforeseen contingencies. The stress tests conducted on various facets of banking operations point to adequate resiliency of the system to credit, market and other exogenous risks," it added.
The report said Qatar's banks and corporates were increasingly becoming aware of the need to institute sound governance mechanisms.
"Regulatory infrastructure is being continuously fine-tuned to meet the requirements of a modern market economy," it said.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.