Qatar’s budget deficit may fall to 5% of the country’s GDP this year, or $8.7bn, and then “shrinking further” through to 2019, mainly due to “increasing hydrocarbon receipts and the ongoing consolidation” of current spending, a new report has shown.
Although full-year data for 2016 is not yet available, according to Qatar Central Bank (QCB) data, the deficit for the first three quarters of 2016 came in at $9.2bn, or 8.2% of the GDP, according to Samba Financial Group.
From the same period a year earlier, revenue has fallen by 41.3%, while expenditure has declined by 20.7%.
“We estimate a full-year deficit of $12.3bn (8% of GDP) very close to the budget target,” Samba said in its latest economic monitor.
Despite the deficits, it said Qatar is “clearly headed on a more sustainable fiscal path”, which is due in part to the multitude of subsidy cuts.
It should also be noted that a 65% cut in capital spending would see fiscal surpluses for each of the forecast years — so it can be seen as an inter-temporal issue rather than a structural one, Samba said.
The 2017 budget targets a reduced deficit of $7.8bn, down from $12.8bn in the 2016 budget. Revenues are expected to increase by 9%, based on an assumed oil price of $45/b — ($12/b below Samba estimates).
Total spending is budgeted to decline by 2%, driven by a 6.6% drop in recurrent spending as the government continues to seek efficiencies. In contrast, capital spending is expected to increase by 3.2%, bringing its share of total spending to 49.1% from 46.7% last year.
The bulk of capital spending will be focused on transportation and infrastructure (21.2%), health (12.3%) and education (10.4%).
The Ministry of Finance also signalled that they would agree $12.7bn worth of new contracts in 2017, adding to a stock of $102.7bn non-hydrocarbon sector projects already initiated by the public sector. The budget makes clear the intent to reduce the deficit while still prioritising capital spending which will continue to help the country prepare for the 2022 World Cup and to diversify the economy.
“Similar to last year, the authorities intend to finance the deficit through debt issuance and not draw down on external savings,” Samba said.
Qatar’s current account deficit for the first three quarters of 2016 was $6.2bn or 5.6% of GDP. The trade balance remained in surplus ($17.9bn), though down 67.1% from the same period of 2015.
“We foresee a current account surplus in 2017 of 2.1% of GDP, with surpluses increasing in size through to 2019 in line with higher oil prices,” Samba said.