Qatar’s ability to meet its external debt obligations is “not in doubt” as large stocks of foreign reserves at the Qatar Central Bank and even larger assets at the Qatar Investment Authority (the sovereign wealth fund) are sufficient to cover the country’s entire stock of external debt, a recent report has shown.
But, according to The Economist Intelligence Unit (EIU), the sovereign risk rating is constrained by the fiscal and current-account deficits, which were expected to persist in 2017 and 2018.
The deterioration in the current-account balance continues to weigh on the currency risk rating. Nonetheless, the sizeable reserves at the central bank and the QIA can be deployed to defend the riyal’s peg to the dollar, if the need arises.
Continued rapid credit expansion against the backdrop of falling government deposits places domestic banks under liquidity constraints and poses downside risks to the rating.
Moreover, the banks’ heavy exposure to the cyclical real-estate sector means that asset impairment cannot be ruled out if property prices slump. The non-performing loan ratio - although low by global standards - is rising, the EIU said.
With the economy largely driven by public-sector investments, and hydrocarbons accounting for most of state revenue, Qatar is exposed to oil market volatility, it said.
According to the EIU, Qatar’s real GDP will grow at an average 3.7% between 2015 and 2030. The “robust growth” will be sustained by Qatar’s economic diversification investment projects.
There remains potential for bursts of high growth if new gas export projects are approved by the government after its moratorium on new deals expires, EIU said.
Diversification and the expansion of the services sector, funded by the state’s hydrocarbons wealth, will provide opportunities for growth.
Qatar’s population will continue to increase, largely through immigration. As a result, growth in real GDP per head will be much slower than headline growth, the report said.
Qatar’s standing has “improved slightly” in the forecast period (2016-20) in the EIU’s overall business environment score from 7.13 in the historical period (2011-15).
However, improvements elsewhere mean that Qatar’s global ranking slips to 30th; it retains the third slot in the regional ranking.
The strengthening of Qatar’s business environment is driven by improved policy towards private enterprise and investment, the development of its infrastructure and increased availability of financing. Political stability and the continuity of Qatar’s domestic policies continue to provide reassurance to local and foreign investors.
However, the EIU noted Qatar’s score declines in market opportunities and the macroeconomic environment, as a result of the completion of its major gas industrialisation development phase and lower oil and gas prices.
Qatar MEPI drops 0.88% in H2 amid lower prices
By Santhosh V Perumal
Lower prices, especially for special purpose machines such as underground rock cutters and earthmovers as well as transport equipment like trailers, led Qatar to witness 0.88% year-on-year (y-o-y) decline in machinery and equipment index (MEPI) in the second half (H2) of 2016, according to official figures.
The MEPI, a short-term indicator that is calculated semi-annually, was down 0.09% when compared to that in the first half (H1) of 2016, the Ministry of Development Planning and Statistics said.
The MEPI - with 2012 as the base year - is used by national accounts as a deflator to calculate the constant price estimates of purchases on final demand from machinery and equipment and in calculating the capital formation estimates.
Under the new indicator; office, accounting and computing machinery group carries the maximum weight of 41.45%, followed by transport equipment (28.34%), special purpose machines (22.78%) and machinery and electrical appliances (7.43%).
The index of special purpose machines shrank 1.64% y-o-y in H2 2016 on the back of a 2.79% decline in the price of underground rock cutters and tunnelling machinery, 1.55% in mining and quarrying machinery and 1.45% in moving, grading, levelling, scraping, excavating and tamping equipment (including bulldozers).
The group index had fallen 0.49% compared to that in H1 2016 owing to a 1.56% fall in the price of underground rock cutters and tunnelling machinery, 0.49% in mining and quarrying machinery and 0.39% in moving, grading, levelling, scraping, excavating and tamping equipment (including bulldozers).
The index of transport equipment shrank 1.26% y-o-y in H2 2016 on account of a 1.26% decline in the price of motor vehicles and trailers, and 0.19% each in other transport equipment and motorcycles and other light transport.
The transport equipment index had fallen 0.49% against H1 2016 on a 0.49% fall in the price of motor vehicles and trailers, and 0.19% each in other transport equipment and motorcycles and other light transport.
The index of office, accounting and computing machinery fell 0.29% y-o-y in H2 2016 mainly on a 1.08% shrinkage in the price of portable automatic data processing machines such as laptops and 0.39% in computing machines and parts; even as there was a 0.95% increase each in the price of office and accounting machinery and photo copier machines, 0.39% in other automatic data processing machines as storage units and input/output units.
Nevertheless, the index of office, accounting and computing machinery had risen 0.59% compared with H1 2016 on a 0.95% increase each in the price of office and accounting machinery and photo copiers, 0.6% in portable automatic data processing machines as laptops and 0.49% each in computing machines and parts and other automatic data processing machines such as storage units.
The index of machinery and electrical appliances had reported 0.29% decline y-o-y in H2 2016 mainly on 0.29% shrinkage in the price of electric motors, generators and transformers. The index was down 0.09% owing to 0.9% fall in the price of electric motors, generators and transformers.
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