Qatar’s economy is expected to grow by 5.2% this year with “strong economic outlook” in the medium term mainly on the back of robust non-hydrocarbon growth, the International Monetary Fund said yesterday.
IMF’s latest country report indicates the country’s nominal GDP would exceed $191bn this year from $184.7bn in 2012. “Qatar’s economic outlook remains strong with robust non-hydrocarbon growth, and inflation rising only gradually over the medium term,” IMF said. “The projected headline real GDP growth of 5.2% for 2013, should by no means be considered low, since this is merely a reflection of constant LNG production after 2012,” said IMF Mission Head (Qatar) Ananthakrishnan Prasad.
“The growth rate of the non-hydrocarbon sector is projected to remain high,” Prasad told Gulf Times yesterday. The main downside risks for Qatar, according to IMF, are lower hydrocarbon prices, tightening of external financing conditions, and potential disruption in transportation of LNG due to increased geopolitical tensions. Growth in the non-hydrocarbon sectors will range between 9 and 10% over the medium term, while the hydrocarbon sector is projected to grow between 1.1 and 3.5% over the medium term.
With infrastructure-related construction activities picking up and as the demand-supply situation in the real estate market converges in view of the expatriate population increase, inflation will gradually increase from 3% in 2013 to 5% by 2016. Fiscal and external surpluses are projected to taper down significantly, due to flat LNG and a declining trend in crude oil production and exports, and due to higher fiscal expenditure. Qatar, it said, has benefited from high oil and natural gas prices and production, with expansionary government spending and an accommodative monetary stance providing additional stimulus. The government has now shifted its focus to economic diversification and growth in non-hydrocarbon sectors through targeted infrastructure investments.
“Qatar’s banking system remains highly capitalised and profitable,” IMF said. The capital adequacy ratio of commercial banks rose from 16.1% in 2010 to 21.1% in June 2012, while nonperforming loans declined from 2% to 1.7% over the same time period, and the return on assets recording 2.5% in June 2012. On the other hand, IMF underscored the need to reduce the buildup of liquidity and currency mismatch risks and to prevent accumulation of excessive exposure to the real estate sector. It welcomed the Qatari authorities’ efforts to develop a deep and liquid domestic debt market, which will bring important benefits in financing, monetary transmission and liquidity management.
With regard to 2012, IMF said the country’s growth rates have stabilised last year, mainly due to a slowdown in hydrocarbon sector growth, as the self-imposed moratorium on increasing liquefied natural gas (LNG) capacity kicked in. The non-hydrocarbon sector was projected to have grown at 9% in 2012, driven by the construction, transport and communications, trade and hotels, and services sectors. For the second year in a row, average CPI inflation was expected to have averaged around 2% in 2012, mainly due to “depressed” rents, IMF said.
Source: Caye Global News, Gulf Times
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