"Inflation is likely to stay on an increasing trend in the short term"
"Inflation is likely to stay on an increasing trend "...bad news guys..
According to Merrill Lynch Company, Gulf inflation could accelerate to fresh highs this year as the oil producers with pegs to the dollar cut interest rates in line with the US, fuelling borrowing. The pegs force the oil producers to track US monetary policy at a time when the Federal Reserve is cutting interest rates to stimulate the economy. In contrast, Gulf economies are surging on oil prices that have more than quadrupled in the last six years, spurring inflation
Inflation in Saudi Arabia may average six per cent this year, compared with 4pc last year, said Merrill Lynch and Company.
Price rises in the UAE may climb to a 20-year high of 12pc this year, compared with 10pc last year, the US investment bank said in a report.
In Qatar, where prices are rising the fastest, inflation could accelerate to 14.5pc this year from 14pc in 2007, Merrill Lynch said.
Inflation pinches...
Inflation does not only affect the purchasing power of your money but also reduces the effective rate of return on your investments.
Now let's get straight to the point as to how it affects your investments. The end product of your investment will not have the same purchasing power as it holds today. But how do we arrive at that calculation.
There are lots of articles on inflation but very few explain how to calculate it. Hence, let us concentrate more on this as it is the main crux of this article. Also let us see its effect on your investments.
What you as investors need to calculate is the Real Rate of Return.
Normally investors look at the nominal rate of return. Nominal interest rate tells you how fast your investment grows. The real rate of return gives you the growth in the purchasing power, which is what should actually matter to you and me.
Let us take an example to understand this concept.
Say an investment is earning 8 per cent per year for you. If you have invested Qr 1,000 then at the end of the year you will have Qr 1,080. This means that your investment has grown by Qr 80 -- the interest earned at 8 per cent on your capital of Qr 1,000.
The real rate of return can be calculated using the formula below:
[(1+ Rate of Return)�/�(1+ Rate of Inflation)] - 1 (Read 1+ Rate of Return divided by 1 + Rate of Inflation less 1)
For example let us assume the rate of return at 8 per cent and the rate of inflation at 3 per cent.
Then the real rate of return will be [{(1+8 per cent) / (1+3 per cent)} � 1]* 100 = 4.85 per cent.
In the above example, though you have earned Qr 80 on an investment of Qr 1,000, at the end of the year your investment will actually be worth Qr 1048.50 only.
Thus, inflation not only erodes your interest but the principal amount too
My karma ran over your dogma!
So you're saying factual figures and information shouldnt be posted because of fear?
This is not speculative fearmongering, this is the REAL situaion going on here. "Protecting" the public from information is nothing short of censorship.
Salaries in GBP have taken a tremendous hit, I've got NFI what you're on about there.
The most serious proble of all I find is posting such a post - it confirms and increases the fear people trying to overcome the cost of living. The dollar peg does have something to do with salaries, but only those who are associated with the dollar. The British pound and the Euro are also higher than before. so even if inflation is 0,5% it is much less than in other countries.
On the other hand Qatar is subsidising some food articles to ease the price increase especially in this area.
Many people are already just on the brink of survival and are lving one day at a time - not to forget that prognosis are often wrong, and America has caused a world wide recession already - jepordising jobs and companies.
Take it easy - inflation will come and go and the human race will still survive.
That depends what your salaries in.
The most serious problem for people is not the inflation, but the devaluation of the Dollar(since QAR is pegged to it), over a 10 month period last year USD went down 30 percent compared to my home Country currency.
Official clips like this may not sound like new news to you, but for people trying to negotiate or re-negotiate packages the more information they can get like this the better so please don't be snide about people posting articles.
will they never learn???>sigh
life's too short so make the most of it, you only live but once.......
so whats new???
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