Qatar’s real GDP per capita growth may contract by 0.5% on average over 2013 – 16 as the large investment programme to enhance LNG production capacity to 77mn tonnes per year tails off, S&P has said in a report.
In its recent country assessment Standard & Poor’s said Qatar is one of the wealthiest economies, with GDP per capita estimated at $98,000 in 2013. Relative to peers, real GDP per capita growth has been strong in recent years, but slowed sharply in 2012.
“We project population growth to average around 6% per year until 2016,” the report said.
S&P said it views Qatar’s macroeconomic policy flexibility as “adequate overall”.
“This incorporates our assessment of strong fiscal and external flexibility combined with limited monetary policy flexibility. Given the fixed exchange rate with the dollar, we accordingly view monetary policy flexibility as limited,” Standard & Poor’s said.
The government has the financial means to implement countercyclical policies when needed without recourse to international or local capital markets. Qatar has accumulated considerable foreign assets over the past decade thanks to its high resource endowment, which has improved terms of trade and enabled long-term investment planning.
S&P estimates that the general government net asset position will remain strong, at more than 70% of GDP.
Although there is a strong momentum in Qatari economy, it is dependent on oil and LNG production despite the progress made by the country in diversifying its economy, the report said.
“We believe the economy will continue to show strong, although slowing, momentum, reflecting Qatar’s robust private consumption and the significant infrastructure development programme,” S&P said.
Economic risks for the Qatari banking sector remain “average” in a global comparison, it said.
S&P expects Qatar’s real estate market to recover from its sharp decline since 2009, although the commercial sector still remains more vulnerable than the housing segment. This is one of the main risks faced by the Qatari banking sector, in its view, given its high concentration in lending to cyclical sectors like real estate and construction.
“Our assessment of industry risks reflects marginally stronger competitive dynamics and improved system-wide funding for Qatari banks. After a few years of robust asset expansion, and even though Qatari banks’ risk appetite remains high, we expect lending growth to decelerate to about 15% in 2013 and the years ahead.
“Moreover, growth will be driven to a large extent by exposure to the government, government-related entities, and a handful of major local groups involved in government-backed projects, where the risks are more limited.”
Lower lending growth should also slow amid rising funding needs. The recent improvement of the domestic deposit to loan ratio (94% in May 2013, compared with 87% in 2012) also reflects an increase in public sector deposits.
The share of domestic public sector deposits in total deposits rose to a record of almost 40% in early 2013. These government-related entity deposits display short-term contractual maturity but are fairly stable and have significantly reduced the reliance of the banking system on cross-border funding, S&P said.
On the other hand, S&P considers that, although Qatari banking regulations are in line with international standards, supervision has room for improvement.
“The central bank could have taken more proactive measures during the global 2008-2009 crisis, although the authorities identified potential problems relating to real estate or equity exposures and acted quickly to fix them. Additionally, the official non-performing loans (NPL) ratio in Qatar was 1.7% of total loans in 2012, which in our view underestimates the banks’ impaired assets ratio, as it doesn’t include other substandard loans, not reported as official NPLs,” S&P said.
Reported by: Caye Global News, Gulf Times
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