Qatar’s growth will be driven by the non-hydrocarbon sector, BMI Research has said and noted it expects growth to accelerate from 2017 levels, as construction and manufacturing activity picks up on the back of government-led efforts to complete 2022 FIFA World Cup-related projects and diversify the economy.
Limited output gains in the hydrocarbon sector, however, will remain a drag on real GDP growth in Qatar over the quarters ahead, the Fitch Group company said.
“We expect growth in Qatar’s hydrocarbon sector to remain sluggish over 2018, amid tight compliance with Opec-stipulated oil production cuts, and limited gas output gains. The ongoing GCC diplomatic crisis will continue to weigh on consumer and investor sentiment to some extent, although confidence is likely to pick up from 2017 levels as hydrocarbon prices rise,” BMI said.
Meanwhile, the effects of the Quartet (Saudi Arabia, the UAE, Bahrain and Egypt)’s boycott against Qatar on the latter’s banking sector and imports have eased. This will support credit availability, and facilitate continued strong growth in the construction and manufacturing segments, driven by government-led efforts to complete 2022 FIFA World Cup-related projects and diversify the economy.
Overall, BMI forecasts Qatari real GDP to expand by 2.7% in 2018 and 3.1% in 2019, from an estimated 1.8% in 2017.
With Opec-stipulated oil production cuts extended to end-2018, and the start-up of the Barzan gas project facing difficulties, BMI expects hydrocarbon sector performance to remain relatively sluggish in Qatar over 2018.
BMI notes that any substantial uptick in output from the recently announced plans to resume drilling at the North Field appears unlikely to materialise before 2020 at the earliest.
Construction, meanwhile, which grew by an estimated 10.7% y-o-y in Q3, 2017 (latest available data), looks set to remain a key driver of growth as projects linked to the 2022 FIFA World Cup progress. Any issues with shortage of materials resulting from the cut-off of regional trade links since June 2017 appear to have been temporary: the sharp 39.1% m-o-m import rebound in August, following an initial drop of 37.9% in June, suggests the process of establishing alternative supply chains has been largely successful.
BMIs expect Qatar’s construction sector to grow by a strong 15.4% in 2018, and 14.1% annually on average over the five-year period to 2022. In addition, it also believes that government-led efforts to develop the manufacturing sector – in particular, local food processing facilities – will provide a boost to non-hydrocarbon activity.
Some other non-hydrocarbon sectors will nevertheless continue to be affected by persistent intra-GCC tensions over the coming quarters. In particular, the tourism (around 40% of all tourist arrivals into Qatar originate from the Arab Gulf) and aviation sectors will see slower growth, having been directly impacted by the shutdown of borders. More broadly, the ongoing tensions are likely to continue to weigh on consumer and investor sentiment in Qatar to some extent, BMI said.
However, towards the second half of the year, BMI expects this trend to be more than outweighed by hydrocarbon price gains — which are closely related to confidence levels in the country, as the government derives the vast majority of its revenue from oil and gas earnings. Rising hydrocarbon prices will boost the government’s ability to support the economy through expansionary fiscal measures.
BMI has forecast Brent to average $67 per barrel in 2018 and $75/b in 2018 – substantially higher than the $54.7/b level recorded in 2017.
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