Qatar’s credit growth is expected to accelerate in line with the pace of project execution, NBK has said in a report.

Credit growth has been slowing over the last two years in line with a slowdown in loan demand by the public sector. Credit growth fell to 12.6% y/y in April, its slowest rate in three years, NBK said.

Public sector credit growth dropped to 9.7% y-o-y; the requirement for government entities to obtain Ministry of Finance approval for borrowing has also been a contributing factor.

Meanwhile, credit to the private sector increased to 14.4% y-o-y, spurred on by a boost in lending to the real estate, general trade and consumption sectors especially. Private sector credit growth in 2014 has so far outpaced growth in 2013.

Commercial banks’ assets reached $260bn in April, increasing by 9.7% y-o-y. This is the slowest rate of growth for quite some time, however, and is largely a reflection of the slowdown in the growth of credit and domestic investments. The latter had actually declined by 14% by the end of April this year.

Meanwhile, on the banks’ liabilities side, deposits continue to grow, increasing by a robust 11.7% y-o-y in April. This has been led by the private sector. Indeed, deposit growth has outpaced credit growth in 2014, helping to keep banks’ loan-to-deposit ratios at around 102%.

Qatar’s budget surplus is forecast to narrow from 10.5% GDP in 2013 to 8.8% and 6.2% GDP in 2014 and 2015, respectively. Expenditure growth is likely to outpace revenue growth thanks to lower projected oil prices on hydrocarbon revenues, although according to the recently unveiled 2014/2015 budget, which aims to maintain a tighter rein on expenditures, the pace of current expenditure growth is forecast to slow more substantially than in previous years.  The authorities have also pencilled in an increase of 17% in development spending; historically, actual spending has frequently fallen short of projections, but this will likely change given the imperative of looming project deadlines.

The government intends to spend approximately $182bn executing its development plan between 2014 and 2018. On the revenue side, burgeoning exports of manufactured products, receipts from corporate taxes and income from investments are, however, expected to rise and boost the state coffers during the forecast period.

Qatar’s current account surplus, while still large by regional and international standards, at 31% GDP in 2013, is also projected to narrow this year and in 2015, to 28% and 25% GDP, respectively. This is primarily due to levelling export growth and rising imports.

The former is related to the plateau reached in LNG exports, which account for more than 60% of total exports, combined with a predicted softening in international oil prices in 2015 and beyond. Exports of products associated with increasing gas production, however, such as liquefied petroleum gases (LPG) and petrochemicals will be boosted by the commissioning of the Barzan facility and, further down the line, by the completion of the Karaana and Sejeel petrochemical complexes.

Imports, meanwhile, are forecast to rise in line with Qatar’s expanding population and economy, NBK said.

 

 

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