‘Safe haven’ Qatar set to post 19.5% growth on LNG boost

Qatar has an estimated 2011 GDP of $125bn, of which some 47% has been derived from oil and gas on average since Q1, 2009

Driven by increased LNG sales, Qatar’s real GDP growth is expected to be the world’s highest of 19.5% this year, Deutsche Bank has said in a report.
Next year’s projected growth rate of 7.5% in real terms would also place it among the world’s fastest growing economies, the report said.
“Among the major oil and gas producers, Qatar stands out for the remarkable strength of its fiscal and current account balances, which are projected at 19.4% and 35.5% of GDP respectively for this year, and 15.5% and 32.9% in 2012,” Deutsche Bank said.
Qatar’s economy is small, with an estimated 2011 GDP of $125bn, of which some 47% has been derived from oil and gas on average since Q1, 2009.
Based on expected fiscal spending, a Deutsche Bank team has calculated the budget breakeven oil price for Qatar at $45 per barrel.
“The State of Qatar boasts the lowest oil budget breakeven point at an estimated $45 per barrel,” the report said.
According to Deutsche Bank, Qatar is expected to spend about $100bn on infrastructure over the coming five years. The FIFA World Cup 2022 should also provide a strong focal point for local economic activity.
“Given current market volatility and concerns on global growth, Qatar looks to be a safe haven, and the banking sector could be a key focus for investors looking for a compelling mix of defensive qualities, decent growth and solid yields,” Deutsche Bank said.
The Q2, 2011 results showed ‘positive’ growth trends as the banking sector added QR10.9bn loans, with all banks under coverage (except one) posting stronger-than-expected loan growth.
Deutsche Bank noted that the local banks’ domestic exposure is increasing and should remain anchored in Qatar for the foreseeable future.
On aggregate the proportion of domestic assets to total assets in the banking sector has been rising over the past few years. Close to 90% of all banking assets were domestic in 2010.
This ratio is likely to have risen in H1, 2011 in light of the substantial bond issuance by the Qatar Central Bank (QCB) to local banks. The government of Qatar has deployed significant resources in support of the banking industry since 2008, spending an estimated $8.9bn or 7% of 2011 GDP in various support packages designed to reduce risk exposures and increase capitalisation levels.
As a result, Qatari banks now have less risky asset profiles as well as improved liquidity. The biggest decrease in risk exposures has come from a substantial reduction in equity trading books, and a massive increase in banks’ holding of Qatari government securities.
The latter comprises sovereign and quasi-sovereign notes, typically with a tenor ranging between three and seven years, and with coupons ranging between 5% and 6.5%.
“We also note that the increase in capitalisation levels – largely a result of capital injections and strong internal capital generation – has reduced aggregate exposure to real estate loans relative to the Tier 1 ratios across the entire sector,” Deutsche Bank said.