Qatar’s economy is expected to witness a slowdown at the end of this year, compared to last year, due to external dangers that can impact the prices of oil and gas, KFH-Research said in its latest report about the country’s outlook.
However, despite the slowdown in GDP growth expectations, the booming constructions sector would underpin the overall economic growth which is expected to grow 8 percent this year.
In 2011, Qatar’s real GDP growth expanded by 17.6 percent y-o-y reinforced by a sizeable increase in liquefied natural gas (LNG) production. “The GDP growth rate is expected to moderate in 2012 from 2011 due to increased external risks which may lead to lower hydrocarbon prices. Despite the moderation in growth, we continue to expect a robust and increasingly broad based growth for Qatar in 2012 with 8 percent y-o-y growth forecast, as LNG exports driven growth will remain, while the focus shifts to domestic demand based activities,” the report said.
Since its selection to host the World Cup in 2022, activity within Qatar’s construction industry is gathering pace in preparation for the event, on the back of the government’s strategy involving the development of infrastructure. The construction industry (which accounts for almost 5.0 percent of GDP) recovered to 10.0 percent y-o-y in 2011 after two consecutive years of decline and is expected to gain the same momentum in 2012.
Qatar’s construction activity involves four major projects. The first encompasses directly related 2022 World Cup expenditures. Second is the $11.1 billion Doha Airport, with its first phase set to kick start operations in late 2012 while waiting for the second in 2015. Third, the new Doha Port, valued at $8.2 billion, will replace the existing one located in the downtown of the capital with the first phase to be completed in 2016 while awaiting full completion in 2030. Fourth is the $25 billion rail plan.
The overall inflation in Qatar is still being depressed by persistent falls in rents. Even with the expected rise in population, the excess supply in the residential property market will take time to work itself out. The decline in housing costs, coupled with falling international commodity prices, is expected to limit inflationary pressures this year and offset the inflationary impact of the surge in liquidity following the salary increases in 2011 and strong lending growth.
Qatar’s CPI is expected to stay in a comfortable range of 1.0 percent-2.0 percent y-o-y for the rest of 2012. Moreover, the report forecast that the country’s central bank will continue to cut interest rates in a gradual manner till 2014 to close spread between the Qatar Central Bank (QCB) rate which is currently at 0.75 percent, and the Fed Fund rate currently at 0.25 percent.
The report further said Qatar’s fiscal revenue is expected to post a sizeable surplus in 2012 supported by LNG earnings despite its planned increases in recurrent outlays. The report expects Qatar to record a budget surplus of 10.5 percent of GDP in 2012 from 2.1 percent of GDP in 2011, as oil prices are expected to stay relatively high. Oil and gas revenue attributes around 75.0 percent of total government revenue. However, there are also downside risks, the report noted.
The main downside risks are lower hydrocarbon prices and potential disruption in transportation of LNG due to increased regional geopolitical tensions. A prolonged low oil prices and a deteriorating G3 outlook would hurt the macroeconomic outlook.
Other major downside risk Qatar faces is the economy’s still heavy dependence on hydrocarbons within the context of a weakly diversified economic base.
source: Saudi Gazette
You must be logged in to post a comment.