|
STRONG FOOTING
Qatar’s economic performance remains stellar, supported by strong
hydrocarbon prices and prudent government policies. After strong growth
over the last few years, the economic expansion remains buoyant.
Recently released official data indicates that nominal GDP growth
expanded by 33.8% in 2005. The phenomenal nominal growth rate reflects
the continued increases in hydrocarbon revenues, especially with regards
to increasing prices. Importantly, the non-hydrocarbon sector’s growth
also remained strong at 18.8%, although this was a marked slowdown from
the previous year due to the high base effect.
Economical Growth
With regards to real GDP, the growth rate slowed, albeit still remaining
very respectable at 6.1% in 2005. This was a result of a slowdown in the
rate of increase in hydrocarbon output and the high GDP deflator partly
due to the increasing oil prices. In 2005, Qatar’s crude oil production
increased by 2.6%, compared to a 46.9% increase in the price of Qatari
crude. Indeed, the oil deflator jumped from 131.7 in 2004 to 191.7 in
2005 due to the sustained rise in the price of oil.
Nominal GDP growth expanded by 31.0% y/y in Q2, with the average price
of Qatar’s crude increased by 29.1% to USD 63.0p/b in H1 2006. Although,
the oil price increase will again be removed from the real GDP growth
forecast, increased production of gas, and to a lesser degree oil, will
result in a strong real growth rate. Liquefied natural gas (LNG) exports
are forecast to reach 25.0m tonnes in 2006, compared with 22.9m in the
previous year.
Moreover, non-oil sector growth accelerated in 2006, driven by higher
government expenditure and investment, driving demand in the economy.
Government spending is slated to increase in 2007. Meanwhile, public
project and infrastructure spending will increase by 70.5% to QAR 20bn.
After huge investments, many projects are entering the execution phase.
Earlier in 2006, Qatar became the global largest exporter of LNG,
surpassing Indonesia. Going forward, there will particularly be large
increased in LNG production in 2007, with the completion of the 5th
train of RasGas II, followed by the commissioning of the 1st train of
Qatargas II at the end of the year. Owing to the higher gas production
in 2007, real GDP is forecast to accelerate to 8.3%.
Qatar has been looking to invest its surpluses into overseas companies
(in both Europe and Asia). Investments overseas have been an area that
Qatar has traditionally been behind the other Gulf States, given the
emphasis on internal development. Widening the investment base will add
greater robustness to the economy and investment income, as they provide
an extra level of diversification into economies with different drivers
to growth and cycles. Furthermore, it is a tool to tap into strong
economic performances in other regions and important as they help to
support the government’s fiscal position, expenditure and consequently
GDP growth at times of lower oil prices.
Meanwhile, the central bank is also looking to diversify its reserves.
This is aimed to limit the impact of the weakening of the US dollar
against other major currencies on the valu e
of its reserves.
There have been some growing pains linked with the strong performance of
the economy. The large influx of expatriates has resulted in a shortage
of housing and increased rental costs. Furthermore, the costs of
building materials have also been increasing with the strong demand and
shortages in products such as cement. As a result, inflationary pressure
has been rising, increasing the cost of projects. However, increasing
export volumes mentioned above and continued investment will result in
Qatar being the region’s fastest growing and richest economy. |
