IMF sees Qatar GDP growth around 6%

Viewed by: 172
Not rated yet
IMF sees Qatar GDP  growth  around 6%
1:10 AM
10
March
2014

By Pratap John

Chief Business Reporter

 

Qatar’s GDP growth could stay around 6% this year, according to the International Monetary Fund (IMF).

The IMF expects Qatar’s non-hydrocarbon sector to outperform the energy segment and maintain a growth of about 10% in the medium term.

Qatar’s “short and medium-term macroeconomic outlook is positive under the baseline”, the Fund said in an assessment of local economy after its Qatar mission visited the country last month.

It said Qatar’s GDP growth could stay around 6% in 2014 “as the pickup in the public investment programme is roughly offset by a modest decline” in hydrocarbon output.

Public investments are expected to keep growth roughly 6-7% over the medium term, with non-hydrocarbon growth remaining about 10%.

Inflation is projected to remain benign at 3 to 4% going forward, a modest increase from recent years.

The anticipated gradual decline in commodity prices, including for food, should help reduce price pressures from strong economic activity in the context of the exchange rate peg.

Fiscal and external balances are projected to taper down significantly over time due to flat LNG production, falling crude oil output from mature fields, expected lower hydrocarbon prices, and growing nominal expenditures.

The public debt ratio is expected to fall, but the headline budget balance could, according to IMF staff projections, turn into deficit over the medium term, while the current account surplus could drop to 5% of GDP.

Domestic risks to the above baseline are mostly related to the ongoing public investment programme. The investment projects are essential to propel non-hydrocarbon sector growth and facilitate economic diversification.

However, the IMF said the programme entailed the possibility of overheating in the near term and low return and overcapacity in the medium term. In particular, the extent to which public investment will durably boost private sector productivity remains uncertain.

To address “overheating risks”, the IMF said the authorities were monitoring price developments and attempting to identify and address any supply bottlenecks emerging from increased investment activity.

“Qatar remains exposed to several global risks,” the IMF said. In the short-term, these risks include global financial market volatility due to the exit from unconventional monetary policies (UMP) in advanced economies, a persistent slowdown in emerging markets and a renewed crisis in the Euro area.

Revenue losses from lower oil and natural gas exports would likely be the “most significant spillover channel” for Qatar given the high share of hydrocarbons in budget revenues and exports. However, the financial channel could also emerge as important depending on circumstances, given Qatar banks’ remaining wholesale funding exposures abroad and external financing needs for the infrastructure programme. A global financial shock would also reduce the value of Qatar’s sizeable foreign assets.

The main medium-term risk remains the possibility of a sharp decline in oil and gas prices in light of growing unconventional oil and natural gas supplies, sluggish global growth and rising energy efficiency.

Indeed, there is anecdotal evidence that while the US shale gas boom has not meaningfully affected revenues so far, it is starting to put downward pressure on prices negotiated for future LNG supplies.

According to IMF calculations, a plausible drop in oil prices relative to the baseline (by $26.5 a barrel, which is the historical standard deviation of oil prices) could place the public debt ratio on an upward path.

Given its geographic location, Qatar is also “susceptible to the tail risk of a conflict” in the region and related transport disruptions, the IMF said.

Amid these risks, the IMF said Qatar had “ample policy space” to deal with unexpected circumstances in the short term. Fiscal buffers and remaining natural resources are sizeable and spending is unlikely to be affected by a drop in hydrocarbon prices or market volatility in the near term.

QCB can inject liquidity into the financial system through its lending window and repo operations, and the government could achieve the same goal by managing portfolio allocations of the QIA and public sector enterprises. The government also aided the banking system with equity injections and purchases of impaired assets during the global financial crisis. 

 

 



Add to:

Add Comment
Please make sure the following errors to complete the comment
  • Please write a comment first
  • Sorry.. You cannot use HTML code here
  • Sorry.. you have exceeds the maximum charcter limit
Disclaimer: To use comment service please Login To add your picture and your name to your comments and the appearance of comment in less time
guest
guest
guest
(guest@site.com)
Select Mood Normal Cry Happy Nice Shcoked

Number of characters allowed no more than 1000 Letter

Adding a comments means you have read and agreed onComments Posting ProtocolsAnd You bear the moral and legal responsibility for the publication of this comment on Gulf times portal.
Readers mood after comment
Comments /Number of comments (0)
Order Comments
الصفحة 1 من 0
رقم الصفحة اذهب

Report Abuse

Choose Abuse Reason
  • advertising
  • Not related to subject
  • Offensive
  • Wrong Words
Send
Gulf Times SERVICES
Weather
Prayer times
Newsletter
Currency conversion
Embassy Services

* RequiredFields

Sender Name*
Sender E-mail*
Receiver Name*
Receiver E-mail*
Message