*Alternative supply chains will prevent disruptions to activity in key sectors
The effects of the quartet’s boycott against Qatar on the country’s import levels are “fading”, facilitating “continued growth” in the construction and manufacturing segments, BMI Research has said in its latest report.
The Fitch Group company forecasts Qatari real GDP to expand by 1.9% this year and 2.5% in 2018, from an estimated 2.2% in 2016.
It said the “successful” establishment of alternative supply chains following the outbreak of the GCC diplomatic crisis in June will prevent the resultant boycott against Qatar from causing severe disruptions to activity in key non-hydrocarbon segments such as construction and manufacturing.
However, BMI noted hydrocarbon sector’s performance in Qatar will be weak in the second half of this year, a trend it expects to continue.
BMI researchers expect the Opec agreement to be rolled over to H1, 2018, and “for cut barrels to return to markets” only at a gradual pace in the second half of next year.
While gas production will see modest growth from late-2017 (when the first phase of the Barzan project comes online), any “substantial uptick” in output from recently announced plans to resume drilling at the North Field may not happen before 2020, it said.
Meanwhile, the construction sector, which grew by 15.3% y-o-y in Q2, 2017 - looks set to remain a key driver of growth as projects linked to the 2022 FIFA World Cup progress.
Any major shortage of materials resulting from the cut-off of regional trade links (resulting from the diplomatic crisis and resultant boycott) appears temporary: the sharp 39.1% m-o-m import rebound in August, following an initial drop of 37.9% in June, suggests the process of establishing alternative supply chains has been largely successful.
A government-reported uptick in manufacturing sector growth (to 2.7% in July, from 0.0% in Q1, in part driven by a sharp rise in food processing, as Qatar works to become more food-secure) also appears to support this view.
BMI continues to expect Qatar's construction sector to grow by a strong 10.1% in 2018, and 11.6% annually on average in the five-year period between 2017 and 2021.
Given BMI’s expectation for the diplomatic crisis to be resolved within months (rather than years), and for hydrocarbon prices to gradually rise, it believes sentiment will improve significantly over 2018.