No gain from Euro’s pain

Why are prices of European goods high in Qatar despite falling euro rates?

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Euro

In 2013, Qatar imported goods and services worth QR 98.41 bn (USD 27 bn), roughly 80 percent more than the imports in 2012, latest import figures suggest. A third of these imports (and the largest continent-wise) were from European countries (worth over QR 32 bn or USD 8.78 bn), with Asia closely trailing with a figure of QR 31.96 bn.

In the imports from Europe, the UK had a share of QR 5 bn, while Turkey, QR 1.16 bn. The remaining mostly QR 26 bn worth of goods and services were imported from Euro-Zone countries, for which Qatar, naturally, pays in euro.

The largest imports were from Germany (QR 6.45 bn), Europe’s largest economy, followed by Italy (QR 5.6 bn). Both these countries topped the UK in terms of imports landing in Qatar. The UK being out of the Euro-Zone ranked as the third largest exporter to Qatar in 2013, according to Qatar Central Bank (QCB) figures.

Switzerland was the fourth largest exporter (QR 3.1 bn worth of goods were imported from here in 2013) with France ranking fifth with a share in total imports from Europe of QR 2.75 bn. Denmark (QR 272 mn) and Romania (QR 216 mn) were at the bottom of the list of exporters to Qatar.

Detailed lists of the items imported from Euro-Zone countries are difficult to have but if market sources are to be believed, automobiles, machinery, pharmaceuticals and foodstuff would likely top the list.

In 2009, imports from the Euro-Zone were worth QR 29 bn (excluding the UK and Turkey). The following year, in 2010, the import figures were QR 24.5 bn, while in 2011, imports totalled QR 23 bn and in 2012, QR 25 bn.

The import figures, as we see, have almost been stable, and exclude the UK and Turkey. Considering imports from the Euro-Zone were 8 percent more in 2014, the figure would be QR 28 bn.

Europe imports

More for less?

The pegging of the Qatari riyal (QR) to the dollar (at QR 3.6415, to be precise) means whenever the US currency is strong, the QR gains against major world currencies and vice versa.

Now, since the dollar, before the middle of 2014, was weak against the euro, Qatar, obviously, paid more for its imports from Euro-Zone countries. However, luckily for Qatar, the greenback began firming up with the US economy becoming stronger, and by mid-December last year, the European common currency literally nosedived.

As a result, riyal-euro rates fell to QR 4.48 from the April-May 2014 peak to QR 5.02. In other words, 4.48 riyals fetched one euro by late December 2014 instead of 5.02 buying a euro, seven months earlier. During the whole of 2013, riyal-euro rates averaged at QR 4.83, peaking at QR 4.98 in December and being at its nadir of QR 4.71 in March.

Qatar importsIt is quite interesting to note the average the following year (2014) was also QR 4.83, but a quarter-wise analysis by BQ magazine shows the average in the first quarter (Q1) of 2014 was QR 4.98 which remained unchanged in the second quarter (Q2).

The third quarter (Q3) saw a considerable fall to QR 4.81 and in the fourth and the last quarter (Q4) of 2014 the riyal-euro rate fell further to QR 4.54. The decline was almost 10 percent since the April-May 2014 peak.

Over five months have lapsed since the euro fell against the dollar and the Qatari riyal, in turn, but the goods imported from Euro-Zone continue to be as expensive as they were during the heydays of the European common currency.

Diverse opinions

Businessmen here have varying opinions on the issue. Some say traders are still holding old European stocks so prices remain high, while there are others who argue that since rents continue to rise, the cost of doing business remains high.

However, according to local media reports at least one section of trade and industry believes that traders may be taking undue advantage of the euro’s fall and may not be reducing prices for profiteering.

For example, a euro 10 phone card available in the local market, arguably illegally, cost QR 57 a year ago when the euro was strong against the dollar and the riyal and while its rate should now be QR 49 at the most, it is still available for almost the same price.

A European luxury car available for QR 118,000 in 2010-11 is now being sold for QR 160,000, according to data online. There is some respite in car brands like Volkswagen’s prices, though, according to data off their social media pages.

Main import partnerBusinessman Abdulaziz Al Emadi, a former vice-chairman of Qatar Chamber, representative body of the private sector, said in remarks published by a local Arabic daily recently that some European companies had raised prices of their goods to help offset their losses due to the euro’s depreciation and that was why things imported from the Euro-Zone were not becoming cheaper in the Qatari market.

And European products being of high quality, Qatari importers wouldn’t switch to products from other continents even if they had to pay much less. Another prominent businessman, Ali Hassan Al Khalaf, said that a depreciating euro would take time to make its impact felt on the Qatari market. He said an easing in pricing of imported European goods could be expected over time.

Al Emadi said that due to a falling euro this was the right time to buy property in Europe. He said he saw a deliberate effort on the part of the European Central Bank to devalue the euro to help attract more foreign investment in the Euro-Zone and encourage exports.

One analyst who requested anonymity said this was the right time for Qatar to consolidate its investments in Europe as property prices were low and the euro was weak against the dollar to which the Qatari currency was pegged.

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