Qatar’s economic growth to gain momentum as oil, non-oil output expands

DOHA: Qatar’s economic growth is expected to edge up in 2018 to 1.7 percent year-on-year (y/y), following last year’s growth of 1.5 percent y/y, before accelerating to 2.2 percent y/y in 2019.

Economic activity will benefit from output gains in both the hydrocarbon (+0.3 percent y/y) and non-hydrocarbon sectors (+3.3 percent), with the former witnessing an expansion in crude and LNG production and the latter benefitting from the government’s $200bn infrastructure spending programme.

Non-oil growth is expected to taper, however, with the government’s investment programme reaching an advanced phase; only four years remain for many of the high-profile infrastructure projects, such as the metro, light rail system and stadia, to be completed in time for the World Cup in 2022, NBK noted in its ‘MENA economic outlook for 2018-2019’, yesterday.

After the successful launch of Qatar’s state-of-the-art $7.4bn Hamad Port, which Qatar plans to develop into a regional transport hub, the country’s attention has tuned back to gas/LNG production.

In the short term, the 1.4 billion cubic feet per day (bcf/d) Barzan gas facility should finally come on line, supplying additional volumes of gas and condensates, while in the medium term, the authorities’ intention to expand liquefaction capacity by 30 percent to 100 million tonnes per annum (mtpa) will significantly boost growth in the hydrocarbon sector.

Amid intensifying competition from Australia and the US, Qatar intends to maintain its position as the world’s largest LNG exporter.

The country’s bank deposit growth, at 3.0 percent y/y in May, appears to be slowly increasing, having benefitted from $30bn in public sector liquidity injections (+75 percent y/y at its height in January 2018) to offset the more than $21bn in private and non-resident deposits that were withdrawn from the banking system.

According to NBK analysts, the private sector credit growth, in contrast, is proving robust. Growth has accelerated every month this year, reaching 10.7 percent y/y in May, led by a broad-based uptick in demand for credit from the consumption, general trade, services and real estate sectors.

And this is despite a general rise in the cost of borrowing, although the QCB has only raised its benchmark QMR lending and repo rates once, by 25 bps, to 2.5 percent and 5 percent, respectively, since the beginning of 2017.

Qatar’s public finances appear to be on a sounder footing following the government’s fiscal consolidation efforts, which brought public expenditures down by 12 percent in 2017, and the rise in oil and gas prices.

The fiscal deficit should continue to narrow to 1.2 percent of GDP by 2019, helped by firmer energy prices and additional non-hydrocarbon revenue streams.

The deficit has been financed primarily by domestic debt, although Qatar returned to the international bond markets in April with a successful $12bn bond sale. Meanwhile, QCB international reserves appear to have recovered to $24.7bn in May; around $20bn was tapped in 2017 to stem the capital outflows.

Public debt is expected to peak at 57.8 percent of GDP this year, before falling to 54.3 percent of GDP in 2019.