Posted on December 12, 2015

While lower oil prices will negatively affect Qatar's government revenues, large financial assets provide a sizeable buffer, according to Moody's Investors Service in a new report. The ratings agency said that although it is unlikely that Qatar will be able to replicate the strong growth performance of 2004-2011, average real GDP growth will remain robust at around 5 percent until 2017. This will be driven by growth in the non-hydrocarbon sector, it added. 

Based on its Brent crude oil price projections of an average $55 per barrel in 2015 and $53 in 2016, and assumptions regarding spending growth, Moody's forecasts that the government's fiscal surplus will decline to 6.4 percent of GDP in 2015, from 16.7 percent in 2014 and will turn into a small deficit of 2.4 percent of GDP in 2016. "Despite the oil price shock, real GDP growth in Qatar will likely remain relatively strong over the next two years. The government's fiscal buffers and sizeable assets will sustain public investment, which in turn will support non-hydrocarbon growth," said Steffen Dyck, a VP-senior analyst at Moody's.

"However, we expect low oil prices to lower the government's revenue streams. Qatar Petroleum's profits, which accounted for 33 percent of total government revenues in 2014, will likely decline, although they will remain at fairly high levels." The agency said it expects lower oil prices in 2015 and 2016 to impact government finances and real growth with a lag. This is because LNG projects are typically secured with long-term sale and purchase contracts, assuring a degree of protection against the volatility in spot and short-term markets.

source: Arabian Business