DOHA: Qatar’s public debt is set to rise above 31 percent of GDP as the government issues bonds and taps bank credit to finance its spending. With revenues impacted by lower energy prices, the fiscal balance swung into deficit in 2015: -7.7 percent of GDP in 2Q15. Crude output dropped to an average of 660 kb/d in 2015 due to conservative management of Qatar’s maturing oil fields, NBK said in its updated Qatar Chart Book citing official figures.
Qatar’s gas output will rise in 2017 once the Barzan facility is fully on line, but LNG prices (Japan) are down -38 percent year-on-year at $8/mBTU.
The report said Qatar’s real estate prices are not rising as fast as before; in 2015 price gains slowed from a peak of 43 percent to a low of 14 percent. Annual population growth of 9 percent to 2.5 million has been driven by the labor needs of the country’s development plan. The current account surplus narrowed to 7 percent of GDP in 3Q15 on lower oil and gas export revenues. Qatar conducts the majority of its trade with Asia and the Far East; Japan is the largest importer of Qatari LNG.
Reserves may have stabilized in February at $36 bn (7 months of imports) after falling for 7 consecutive months. fall in foreign currency and demand deposits in February led to the first contraction in M2 (-2.5% y/y) since 2009. Asset growth picked up in 2015 as credit growth accelerated; growth in domestic/foreign investments has slowed though.
Robust credit growth of 17.5 percent year-on-year in February was largely due to increased lending to the public and real estate sectors. Deposit growth slowed to 6.2 percent year-on-year in Feb; government deposits have been hard- hit by the fall in energy prices. As public sector deposits have declined, the contribution of interbank and non-resident deposits to banks’ funds has risen.
In a separate report on GCC’s debt market, NBK said the rise in debt pricing (lower yields) has led GCC sovereigns to step up their issuance efforts to help plug a combined estimated deficit of $140bn for 2016. As of Q1, 2016 GCC sovereigns have issued $16.5bn, leading the GCC’s primary debt market for the quarter. As a result, the GCC’s outstanding bonds increased by 18 percent, to settle at $314bn.
Yields were pushed higher early in the quarter, at a pace not seen since the Fed taper tantrum, following the rapid decline of oil prices to 12-year lows. Dubai 2021 and Qatar 2022 paper saw increases of 57 basis points and 47 basis points over that period, respectively. Oil prices have since recovered; with GCC yields responding immediately (lower), shedding all added points, to settle by quarter’s end little changed at 3.58 percent for Dubai 2021 and down 20 basis points to 2.60 percent for Qatar 2022.
