INFLATION in Qatar’s construction sector could reach 18 per cent a year over the next decade, effectively adding billions of dollars to the cost of building Qatar’s future, said a report published by EC Harris, the global built asset consultancy.

Against a backdrop of unprecedented growth in Qatar, the new report provides fresh insight into how this explosion of construction activity could impact the country’s construction costs and recommends a course of action to keep these inflationary risks in check.

The report ‘Avoiding the Inflationary Bubble’ is based on in-depth global analysis as well as EC Harris’ knowledge of major Qatari programmes already under way and planned.

Qatar’s investment in capital projects and infrastructure – around $160 billion over the next decade – to deliver the 2022 Fifa World Cup and the national vision has resulted in its construction industry benefiting significantly from this growth.

Qatar’s construction sector is poised to expand by an average of 12 per cent a year. While this is a remarkable opportunity to propel Qatar forward, the report outlines how the ability of the supply chain to absorb fluctuations in workload is limited in Qatar. The potential consequence of this is that the risk of price fluctuations in response to workload increases – and with this comes a heightened threat of inflation.

The EC Harris report sets out a series of potential construction inflation scenarios linked to Qatar’s construction programme up until 2023. Construction inflation is set to peak at 18 per cent during the World Cup construction boom between 2016 and 2019 which could potentially add billions to the cost of Qatar’s development, causing the market to overheat.

The report recommends a number of steps which will mitigate the risk: boost the capacity and capability of the existing supply chain; increase the ease with which materials and labour can be transported; revamp the procurement processes; and where possible, stagger the timing of construction projects.

• A Meed Insight report said in the coming five years Qatar could overtake the UAE as the GCC’s second largest project market with more than $90 billion worth of projects likely to be tendered during the period. Contract awards are likely to peak at $24 billion in 2014, potentially seeing it overtake the UAE market in terms of project activity.