Qatar’s 2014 economic outlook remains “strong” with a new report highlighting the country’s healthy LNG sector dynamics and strong fiscal and reserve positions.
In its report “Global Focus 2014” released yesterday, Standard Chartered bank said Qatar’s “debt dynamics is expected to strengthen” over the next five years as the country’s LNG sector has successfully positioned more of its exports to Asian markets, offsetting challenging market conditions in North America and Europe.
“While the LNG-sector dynamics are likely to remain healthy and will underpin strong fiscal and reserves positions, the country’s non-hydrocarbon economy should be the primary growth driver in 2014,” StanChart said.
Government commitments on infrastructure in line with its bid to host the FIFA 2022 World Cup and its longer-term Vision 2030 objectives have resulted in a significant pick-up in infrastructure investment in the economy in 2013, the report said.
“We expect these spending trends to continue but not peak in 2014. A key challenge will be managing the different dynamics as the economy enters this growth phase,” the report said.
Policy makers in Qatar are aware of the challenges as the economy enters another significant phase of its development agenda, it said. During the first phase, from the start of the last decade to end-2011, Qatar ramped up its LNG output to become the world’s largest LNG exporter, with 77mn tonnes of annual capacity.
The second growth phase is primarily focused on delivering the necessary core infrastructure to enable Qatar to achieve its longer-term diversification and development objectives.
Qatar’s external debt to GDP was around 70% in 2012, while general government debt is around 33.4%. According to the Institute of International Finance, Qatar’s net foreign assets should rise to $345bn in 2014 from an estimated $295bn in 2013.
StanChart estimates Qatar’s external debt at year-end 2013 to be around $140bn. It expects Qatar’s debt dynamics to strengthen over the next five years as its LNG sector has successfully positioned more of its exports to Asian markets, offsetting challenging market conditions in North America and Europe.
The bank expects Qatar to maintain its robust credit profile over the next year. Unlike previous years, the Qatar sovereign has not yet tapped the market in 2013 and this has supported spreads in the sector. Qatari banks have been prolific issuers in 2013, and the bank expects this trend to continue, potentially creating an overhang for Qatari bank spreads.
“While AA/A spreads from the region are no longer as compelling relative to similar-rated EM credits, we view them as defensive plays, particularly shorter-dated bonds which benefit from strong local support and hence tend to outperform during periods of market volatility,” StanChart said.
Inflation remains a key challenge: StanChart
Inflation will be a key challenge for Qatar next year, despite the overall rosy economic outlook, says StanChart.
“Rents are likely to be a key driver and we expect them to begin rising next year. We believe this will be driven by the size of the project pipeline in Qatar, which will require an inflow of expatriate employees, generating a new pool of tenants,” a bank said in a report yesterday.
The Qatar Statistics Authority data shows that Qatar’s population rose from 676,000 to 1.71mn between 2002 and 2011.
“In September the rental component of the CPI basket (which has a 32.2% weighting) rose by 6.1% year-on-year. Overall inflation in August, including the rental component, rose by 2.7% (up 1.5% excluding rents). We maintain our 2014 inflation forecast of 3.5% for Qatar, having revised it in September from 2.5%, given the more positive growth dynamics related to the population and workforce,” StanChart said. Source: Gulf Times