DOHA: Qatar’s fiscal balance went into a deficit of $5bn in the first quarter of 2015 (Q1, 15). Impacted by lower oil and gas prices, the country’s external surplus has narrowed to 12.8 percent of GDP in 1Q 15.
While the contribution of exports to GDP has declined over the last year, that of consumption and investments has increased. Oil output has been declining due to maturing oil fields; gas output should rise with the launch of the Barzan facility.
Gas prices have followed oil prices downwards , but the 52 percent drop in Japanese LNG prices since 4Q14 has been dramatic, NBK’s ‘chart book’ on Qatar noted citing Qatar Central Bank’s (QCB) preliminary data for Q1,15.
Qatari authorities remain committed to their strategic projects despite the shelving of 2 petrochemical projects in 2014. Nevertheless, even in the non-hydrocarbon sector, business optimism was affected in 2Q15 by prevailing low oil prices, NBK analysts said.
Qatar’s headline inflation rose to 1.6 percent y/y in July after housing costs began to appreciate once more. Food prices also ticked up. Qatar’s population dropped to 2.1million in July due to the travel season; annual growth was still above 10 percent, however.
Government debt, at 31 percent of GDP, has been declining as the authorities pay back their debt obligations.
Qatar conducts the majority of its trade with the far east; Japan is the largest export destination for Qatari LNG. Reflecting the rise in oil prices in 2Q, reserves increased to $41bn in June. This is equivalent to eight months of imports.
Bank credit growth improved in June to 13.4 percent y/y; credit to the private sector has grown by a very robust 26 percent y/y. An increase in lending helped spur bank asset growth by 11 percent y/y to $292bn (138 percent of GDP).
Bank deposit growth accelerated to 8.9 percent y/y in June, driven by increases in private sector and non-resident deposits. The LD (loan-to-deposit) ratio ticked up in June to 107.6 percent as credit growth began to outpace deposit growth.
Banks have increased their borrowing from the interbank market, from 18 percent in June 2014 to 21 percent in June 2015. Rates were steady until June; concerns about falling oil prices and liquidity look to have forced them slightly higher recently.
With US rates expected to rise in late 2015, rates are expected to follow, albeit with a short lag. NBK analysts said rates spiked in August over worries that GCC states would be forced to follow China/Kazakh and devalue their currencies.
Qatar Exchange’s (QE) lackluster performance in 2015 was compounded by the recent China-induced global equity sell-off, falling to -8 percent ytd. With Fitch just affirming Qatar’s AA rating amid falling oil prices, Qatar remains among the top rated GCC sovereigns.
