DOHA: Despite the halving of oil prices from their 2014 highs, Qatar’s economy continued to grow robustly in 2016, particularly in the non-hydrocarbon sector where key infrastructure projects maintained progress, QNB Group said.
In its weekly economic analysis published on Saturday, QNB Group expected higher oil prices over 2017-19 to have two key effects. First, they will help to boost government income and ease fiscal constraints.
Second, higher oil prices will help support the government’s continued investment spending programme which will be one of the key drivers to underpin growth in non-hydrocarbon sector. In terms of the hydrocarbon sector, we expect this to gradually recover as production picks up over the medium term.
Overall, the analysis expects headline real GDP growth to accelerate to 2.6% in 2017 and 3.6% in 2018 before slowing to 2.7% in 2019 .
The analysis also expects the outlook on oil to improve over 2017-19 as excess supply in oil markets clears. We forecast Brent crude oil to average USD55/b in 2017, from USD45/b in 2016, and rise to USD60/b by 2019. Higher oil prices should boost government revenue and thereby help to ease fiscal constraints. Revenues will also be helped in 2018 by the expected implementation of VAT.
On the expenditure side, the report expects that the bulk of the government’s adjustments to the oil price shock have already taken place, thereby making cuts to current spending in 2017 less severe than they were in 2016. Furthermore, the government has announced significant capital spending plans over the next three years. We expect the budget deficit to narrow from 7.2% of GDP in 2016 to 1.5% in 2017 before switching to a surplus of 1.0% and 2.3% in 2018-19.
Higher oil prices and the positive fiscal outlook should provide a lift to Qatar’s economy, particularly in the non-hydrocarbon sector.
The government’s plans to increase capital spending over the next three years are mainly focused on the implementation of Qatar’s longer-term 2030 vision as well as on the preparation of the upcoming 2022 FIFA World Cup. This will boost non-hydrocarbon sectors such as transportation, construction, education and health, it said.
