With the World Cup economic boom starting to ease, Qatar's economic growth will be affected but higher investments in non-hydrocarbons will help it remain resilient this year, the Institute of Chartered Accountants in England and Wales (ICAEW) has said.
According to the first quarter or Q1 report, Qatar’s expansion will be led by the non-oil sector this year, though the pace of activity will nearly halve to 3.3%, from over 6% in 2022.
"With the economic boom from the World Cup starting to slow down, GDP (gross domestic product) growth will be affected. However, continuing to increase investment in the non-oil sectors and doubling down on reforms will help Qatar remain resilient this year and reach the goals charted in its National Vision 2030,” said Hanadi Khalife, Head of Middle East, ICAEW.
Scott Livermore, ICAEW economic advisor, and chief economist and managing director, Oxford Economics Middle East, said though much of the activity last year was linked to the World Cup, the preparations for the event contributed to medium-term diversification goals through strong gains in construction and real estate, transportation, and financial services.
"These gains will slow in the coming year, and some areas of the economy, such as accommodation and food services, may see a dip in the near term. However, we think the ongoing expansion of gas capacity and the pipeline of planned projects, will draw foreign direct investment (FDI) and support non-oil activity," he said.
Further reforms will also play a role in attracting FDI as Qatar keeps up with the growing competition in the region, according to him.
The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, revealed that Qatar’s economic growth is strong while it still enjoys a boost from the World Cup in 2022.
Qatar’s growth likely exceeded 4% in 2022, marking the fastest pace since 2015 and leaving the economy the largest it has ever been. However, the 2023 GDP growth forecast is still unchanged at 2.7%.
Although energy prices are easing from 2022 levels, they will "remain elevated", supporting
Qatar’s macroeconomic environment, the report said.
Due to higher prices in main export commodities, Qatar enjoyed one of the largest terms-of-trade improvements in 2022, with recent data showing the trade surplus widening to QR355.2bn last year.
As oil and gas prices remain above levels from early 2022, the external position will only deteriorate marginally this year, with the current account surplus at 15.6% of GDP, down from 17.1% in 2022.
Expecting public spending to remain "supportive" of growth in 2023; it said high commodity prices underpinned a 54% year-on-year rise in budget revenue in 2022, pushing Qatar’s budget surplus to QR89bn, the largest since 2014.
Qatar’s 2023 budget, based on a reduction in spending and an oil price of $65 per barrel, projects a surplus of QR29bn, equivalent to 3.4% of GDP.
Forecasting Brent at $86 per barrel in 2023, which is "significantly" above the budgeted price; the report said on that basis, a modest rise in spending and a surplus of QR82bn (9.7% of GDP) is expected.
Hanadi Khalife, head of Middle East, ICAEW.
Scott Livermore, ICAEW economic advisor.