Raising Interest Rates Stimulates the Economy and Supports the Riyal
A number of economic experts confirmed that the decision of the Central Bank of Qatar, which started its application yesterday, to raise the deposit interest rate 50 points to 1.50%, and to raise the lending interest rate 25 points to 2.75%, contributes to maintaining the exchange rate of the Qatari riyal and its stability in light of global economic and political changes.
The experts ruled out the rise in inflation as a result of this rise in interest rates to significant levels, given the strength and flexibility of the Qatari economy, the financial flows from the export of liquefied gas, in addition to the strategy the Qatari government has pursued for years, which is based on achieving a high degree of self-sufficiency, especially in agricultural products and food industries, by producing locally instead of importing it. This alleviates the burden of the rise in global supply chains, and consequently the rise in the rate of inflation.
The decision of the Central Bank of Qatar helps stimulate the economy, encourages savings, enables the national economy to continue its growth rates, and enables entrepreneurs and initiatives to carry out their projects without fear of inflation, he said, stressing that the riyal maintains its strength due to wise policies and the strength of the Qatari economy.
The experts called on members of society not to expand spending, shift to investment and operational thinking, refrain from rushing towards consumer and recreational purchases, and diversify savings into three categories. They anticipated lower price levels in real estate as a result of facing settlements with banks, in addition to an increase in promotions of current products, goods, and cars in order to disburse them from stores and achieve rapid liquidity.
Dr. Hashim Al-Sayed, Chairman of the Qatar Association of Chartered Accountants, said that talk about interest is renewed every month. The United States is fighting to reduce inflation rates, which reached the highest level in 40 years, as commodity prices rose by 8.5%. It is noteworthy that there is a great danger to the people from food inflation, which reached 8.8%, and energy inflation to the level of 32%. Therefore, monetary policy had to restrain inflation and return to low levels.
He pointed out that these goals can be achieved with the diverse economies based on industry, technology, financial services, tourism, agriculture, and others, where revenues are diverse and their expenses are diverse. However, in our society, we find ourselves facing a fundamental challenge based on the wisdom of management and the regulation of financial and monetary policies. We must know the pillars of the house so that scenes and economic events can be managed, as the rising interest rates will negatively affect society, its members, institutions, and companies.
Dr. Hashim Al-Sayed called on members of society not to expand spending, shift to investment and operational thinking, and refrain from rushing towards consumer and recreational purchases. He also called for diversifying cash balances into three categories, even if they are small (local currency - major currencies - small-weight alloys, not occupied gold). He also predicted lower stock exchanges in emerging markets as a result of the shift of portfolios and foreign funds to invest in US bonds in the coming period.
Economic expert Dr. Abdullah Al-Khater said that the decision of the Central Bank of Qatar to raise interest rates keeps pace with global economic and financial conditions, especially since the Qatari riyal is linked to the US dollar. Therefore, it is obvious that when the US Federal Reserve raises the interest rate, we should keep pace with it, but in our domestic interest and the circumstances of our economy.
Al-Khater said: "The world is currently undergoing a wave of inflation that is affecting everything from supply chains to industrial, food, and other aspects of life, but Qatar's strategy since the blockade of building many factories and farms that achieve a large percentage of self-sufficiency has surpassed this." Dr. Abdullah Al-Khater ruled out the possibility of high inflation after the interest rate hike because the Qatari economy is strong and bears any financial and economic consequences worldwide. He also ruled out the completion of major projects that would have been greatly affected if they were currently under implementation, not to mention cash flows from Qatar's exports of clean energy such as natural gas, which is in high demand worldwide. He said: The Central Bank of Qatar's decision helps stimulate the economy, encourages savings, and enables the national economy to continue its growth rates.
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