By Pratap John
Chief Business Reporter
Large external surpluses have allowed a buildup in Qatar’s net foreign assets of about $223bn, which is 132% of the country’s 2015 GDP, a new report has shown.
This, the Institute of International Finance (IIF) said, was “more than double the level in dollar terms in 2009”.
While there has been some foreign direct investment abroad with potential for managerial control, including stakes in landmark names in the UK real estate sector such as the Shard, Harrods and Canary Wharf, these have been overshadowed by larger foreign portfolio investments in recent years, which are not subject to disclosure requirements.
But IIF expects Qatar’s “external surplus to decline sharply, leading to a levelling off in foreign assets and disappearing fiscal surpluses”.
In its report “Qatar: the boom goes on”, the Washington, DC-based IIF said the country’s current account surplus is projected to decline to 3.6% of GDP in 2015, down from 24.2% in 2014, mainly due to the drop in oil and gas prices, which will translate to sharply lower export revenues.
Term sales mean that the full impact of the decline in energy prices will register with a delay of about six months.
“Although the shelving of the Al Sejeel and Al Karaana petrochemical projects frees up gas, which would have been used as feedstock from the Barzan project, there has been no indication that this will be channelled for export.
“The current account could swing to deficit by 2019 in our base case scenario, which sees oil prices averaging $60/b in 2015 and gradually firming to about $80/b in the next two years, due to increasing imports of goods and services related to the country’s development plan, as well as to a rise in the expatriate population leading to growing remittances.”
The current account balance would swing to a large deficit by next year in the event of oil prices remaining at about $50/b and, conversely register large surpluses again if oil prices were to return to 2014 levels.
In 2014, Qatar’s merchandise exports, which have risen more than fivefold since 2005, were down slightly due to lower energy
prices.
Non-oil exports (mostly chemical products) have not fared better. Petrochemical export growth, which are higher value added exports, could slow given the shelving of major projects in this area, although alternative investments are being considered.
“With energy prices expected to remain relatively soft, the fiscal balance is projected to be near balance in 2015 after surpluses in recent years. However, the fiscal position is much better than in most oil/gas-exporting countries and the fiscal breakeven oil price is estimated at about $65 a barrel in fiscal year 2015,” IIF said.