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| The IIF forecasts Qatar’s real GDP growth at 14% in 2010 and 10% in 2011 |
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Posted on 10 Jul 2010 |
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A recent report released by the IIF covering Qatar’s economic performance indicated that the impact of the global recession and financial crisis on the economy was rather muted as performance was helped by a buoyant gas sector and a strong policy response by the authorities.
Following a slowdown to 9% in 2009, the economy is set to grow by 14% this year before slowing slightly to 10% in 2011, as per the IIF. The report indicated that a strong policy response by the authorities helped banks withstand most of the pressure created by the global crisis. Meanwhile, ongoing efforts to expand hydrocarbons production capacity and infrastructure development, and a strong rebound in local bank credit would continue to support domestic demand.
The IIF noted that real hydrocarbons growth of 22% this year reflects increased oil and condensates output, and the startup of the remaining large liquefied natural gas (LNG) production facilities, following earlier delays. The hydrocarbons sector currently accounts for around half of real GDP and is set to rise to 55% by 2011 with the completion of a significant level of LNG production capacity and the associated condensate production.
Meanwhile, real non-hydrocarbons growth is expected to be 6%, a slower pace compared to 2009, partly for technical reasons related to the pace of project implementation, but also due to weakening demand for Qatar’s hydrocarbons products. Nonetheless, the strengthening of bank credit growth from late 2009 onwards and recovery in infrastructure and real estate projects should aid non-hydrocarbons growth.
The report also indicated that consumer prices are expected to rise by an average of 1% in 2010, following a sharp period of deflation throughout most of 2009, which was preceded by disinflation from mid-2008. House and commercial rents, which account for nearly one-third of the consumer price index (CPI), had the largest influence on overall inflation in 2009. Rental rates fell nearly 10% compared to 2008 because of excess housing supply and a fall in demand, as some expatriate employees were laid off in response to the slowdown in 2009. This helped depress the CPI to –5% in annual terms in 2009.
Finally, with respect to public finance figures, the IIF indicated that the deficit on services, income and transfers would widen over the next two years, to around US$ 21 billion (16% of GDP) by end-2011. The deterioration reflects increased debt service costs caused by a rise in external debt to US$ 93 billion by end-2011 (72% of GDP).
The external debt profile largely reflects hydrocarbons investment requirements. Growth in debt is projected to slow through 2011 as the LNG mega projects are finally completed and due to the moratorium until 2014 on developing any new North Field projects. Moreover, the IIF does not expect any new sovereign bond issuances in the short term following the total of US$ 10 billion issued in 2009. In addition, US$ 1.5 billion in Q-Tel bonds in June, US$ 2.3 billion of QP and ExxonMobil bonds in July, and US$ 1.6 billion in Commercial Bank bonds in November were also successfully issued. Qatar’s heavy borrowing is for investments in assets with high export earnings potential therefore, the IIF projects the debt service burden would moderate as export revenues rise. Meanwhile, US$ 2.75 billion in local currency sovereign bonds were issued on June 1.
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