Qatar’s GDP growth to rebound this year on World Cup spending

The International Monetary Fund (IMF) has projected Qatar’s real GDP growth to reach 3.4% in 2017 as the country effectively adjusts to the new reality of sustained lower energy prices.

The IMF, in a new research note, said the rise in 2017 growth reflects an expansion in the non-hydrocarbon sector due to World Cup-related spending and supported by added output from the new Barzan gas project, reported Arabian Business.

It added that Qatar will see further subsidy cuts in 2017–18, an increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation. The inflation rate is expected to moderate back to low levels over the medium term.

“Fiscal and external balances are projected to persist in the near term, though improvements are projected for the medium term, as hydrocarbon prices recover slightly and fiscal adjustment advances,” the report said.

The IMF said the main risks to the economy are related to the possibility of lower hydrocarbon prices compared to the baseline assumption and to the public investment program. In addition, the prospects of further rises in the US interest rates may complicate efforts to bolster economic growth.

The report said financial risks in the banking sector are moderate as banks’ balance sheets remain strong.

The drop in international oil and gas prices has put considerable pressure on Qatar's fiscal and external positions. However, the IMF said the authorities’ policy response has been adequate, underpinned by cuts to current expenditures and renewed efforts towards increasing non-oil revenues.

The authorities’ plan to implement excises on tobacco and sugary drinks starting in 2017 in line with a GCC-wide agreement will yield additional revenue.

The IMF said complementary revenue measures should be explored, including broadening the corporate income tax base to include GCC companies.