Sharp fall in Qatar economic growth forecast

Thursday, 27 October 2011 00:58 - - {{hitsCtrl.values.hits}}

Qatar’s economic growth is expected to drop sharply to 5.1 percent in 2012, down from a projected 15 percent for this year due to receding hydrocarbon expansion, the Gulf state’s development planning authority GSDP said on Tuesday.

“The GSDP foresees a sea change in the economy’s dynamics in 2012,” the General Secretariat for Development Planning (GSDP) said in a report.

“The impulse to growth from vigorous expansion of the hydrocarbon sector in past years will rapidly recede and growth will increasingly depend on solid performance in other sectors,” it said.

The projection is more pessimistic than September’s Reuters poll of analysts, which forecast the economy of the world’s top liquefied natural gas exporter to expand by 18.9 percent this year and 7.7 percent in 2012 helped by higher gas output and robust government spending.

“This is entirely a hydrocarbon effect,” Frank Harrigan, director of the department of economic development, told a news conference.

In 2010, the hydrocarbon-reliant economy is estimated to have grown by 16.6 percent in real terms by the International Monetary Fund. Qatar has yet to release 2010 GDP data in constant prices.

Qatar, one of the top investors globally through its sovereign wealth fund, would also not be immune to the impact of a potential double-dip recession in advanced economies as global credit market difficulties could affect project finance, the authority said.

However, the country is well-positioned to ride out any turbulence as banks are well-capitalised and the government holds ample fiscal reserves, it said.

Qatar’s government budget surplus should reach 12.6 percent of economic output in calendar 2011 and 7.8 percent in 2012, the report showed.

The surplus for fiscal 2010/11 was revised to 19 billion riyals ($5.2 billion), or 4.1 percent of gross domestic product, it said, up from previously reported 13.5 billion riyals, or 2.9 percent of GDP. Qatar’s fiscal year starts in April.

Qatar’s central bank said in a separate report on Tuesday that banks are well provisioned to withstand unforeseen contingencies and a sharp rise in commodity prices and rising local non-rent inflation pressures are likely to be a major concern going forward.

“Qatar’s financial system has remained largely insulated from the global economic gyrations. The banking system continues to remain sound, profitable and resilient,” Central Bank Governor Sheikh Abdullah bin Saud Al-Thani wrote in the financial stability review.

Proactive liquidity management and ensuring orderly financial market conditions remain a top priority for the central bank, it also said in the review posted on its website.

Consumer inflation in Qatar edged up to 2.2 percent on an annual basis in September, its highest level since at least the beginning of 2010, but still far from a record 15 percent seen in the oil-boom year of 2008.

Reuters