Qatar to stick to its spending plans despite volatile energy prices

Despite volatile energy prices and declining revenues, Qatar will continue to spent a ‘considerable sum’ against its originally planned $220bn worth projects envisaged in 2010, in the run up to 2022 Fifa World Cup, The Peninsula reported, citing a new report.

Since winning the hosting rights for the World Cup in December 2010, the country has embarked upon a vast infrastructure investment programme, with total costs estimated at around $220bn.

According to ‘The Report: Qatar 2016,’ the 12th annual edition of the comprehensive report produced by Oxford Business Group in conjunction with the Ministry of Economy and Commerce, the government views this expenditure as necessary not only to prepare the nation for one of the world’s premier sporting events, but also as a medium-term means of boosting growth across the non-energy economy.

As noted by the International Monetary Fund (IMF), this effort has been broadly successful — in 2012-15 GDP growth in Qatar was driven primarily by double-digit expansion in non-hydrocarbons activities, with key contributors including construction, services and manufacturing. This shift from energy to non-energy growth is in line with Qatar National Vision 2030.

The report said Qatar has a surplus-liquidity economy, and given the nation’s solid macroeconomic fundamentals and substantial fiscal and hydrocarbons reserves, many local players and Qatar-watchers are currently bullish on the country’s growth prospects, despite ongoing global and regional economic challenges.

“Qatar hasn’t been much affected by the drop in oil prices and the economy has continued to grow as expected,” Sheikh Faisal bin Qassim Al Thani, Chairman of Al Faisal Holding and Chairman of Qatari Businessmen’s Association, was quoted by OBG as saying.

“The government is nevertheless keen to continue diversifying revenue streams as the economy grows, and the private sector is a major component of that process. So, in the years to come, I’m positive that the performance of the private sector will have a bigger influence on the economy’s overall performance.”

Over the past half-decade, Qatar has posted robust economic growth on the back of strong hydrocarbons revenues, state-led infrastructure development and a rapidly maturing financial sector.

Referring to rating agency, Standard & Poor’s, the report noted that from 2010 to 2015 Qatar was one of the fastest-growing economies in the world, posting average annual GDP growth of 8.6%.

However, the report also noted that the economy is currently facing a number of challenges. Most pressing has been the rapid decline in the price of oil over the past 18 months.

Given that most of Qatar’s long-term gas export contracts are indexed to oil prices, the country’s income dropped off considerably over that period. However, the price situation is evolving and with progress of the state’s economic diversification drive there are some signs for optimism.

“Consequently, like many of its neighbours across the Gulf region, the government is currently in the midst of a far-reaching effort to reduce expenditure and boost non-hydrocarbons revenues in order to shore up national accounts.

“Nonetheless, after more than a decade of double-digit budget surpluses, S&P forecasts both slowing GDP growth and budget deficits of around 4.1% for the period 2016-19. Furthermore, low energy prices and fiscal pressures have impacted the country’s well-developed financial industry, causing concerns about liquidity in the banking sector, and volatility at the nation’s stock market,” the report stated.

Courtesy: thepeninsulaqatar.com