The steady decline in oil prices coupled with the country’s huge commitments to public spending is likely to force Qatar to review its conservative assumed oil price while estimating its revenue for the next fiscal.
Qatar enjoyed a lavish budgetary surplus for years on the back of firm oil prices. The equilibrium of Qatar’s oil price for the current fiscal, like the previous ones, is $65, which is fast closing the gap with the market price that is currently hovering at $85per barrel.
Yesterday, the US investment bank Goldman Sachs slashed its 2015 oil price forecasts, making it the most bearish among major financial institutions, following a near 25 per cent fall in crude prices over the past five months. Goldman Sachs said WTI will go for $75 a barrel in the first three months of 2015. Brent, meanwhile, will change hands at $85 a barrel. Both forecasts are down $15 from what the bank was last expecting. And both are forecast to slip even lower in the second quarter — historically a seasonally low time for oil prices.
The International Monetary Fund (IMF) stressed that Qatar needs a price of $77.60 a barrel to maintain a realistic balance in its budget estimates for the next fiscal.
Qatar is currently sitting on an estimated $200bn commitment to Fifa-related construction projects. According to Qatar Central Bank (QCB) annual report, the country’s public expenditure for the fiscal 2014-15 alone is QR87bn.The QCB data confirms a significant decline in the budget surplus for the fiscal 2014-15 compared to the previous financial year.
IMF, in its regional monetary outlook for Mena released yesterday noted Qatar’s overall fiscal balance would decline to 9 percent of its GDP in 2015, from 11 percent projected for the year 2014. Qatar’s projected current account balance for the year 2015 has also been declined to 23.2 percent of the GDP from 27.1 percent projected for the year 2014.
So far, Qatar’s budget year is April-March. However, Al Sharq recently reported it is planning to shift it to January-December. In this scenario, it’s not clear whether the government will be going for an extended-budget year or come out with an ‘interim budget’ for the next nine months.
The Minister of Development Planning and Statistics, H E Dr Saleh bin Mohammed Al Nabit, told last week the drop in oil prices will not affect Qatar’s proposed development plans. The market fluctuations will have neither short-term nor long-tem impact on Qatar, he said.
“There is still considerable margin between the market price and Qatar’s assumed price. The drop in oil prices and Qatar’s huge public spending commitment might have a bearing on Qatar’s budget surplus, but the country will be still sitting on a huge surplus capable of running its planned development works, Abdullah Al Khader, a Qatari economist told the media. Source: The Peninsula