According to the Ministry of Development Planning and Statistics (MDPS), a robust expansion in both hydrocarbons and non-hydrocarbons helped Qatar economy register 5.5% surge year-on-year in real terms (inflation-adjusted) during the third quarter (Q3) of this year.
Qatar’s economic fundamentals remain sound as illustrated by its high ratings across all three major ratings agencies.
The effects of the quartet’s blockade on Qatar are fading, experts recently said as continued growth is seen in the key construction and manufacturing segments.
Any major shortage of materials resulting from the cut-off of regional trade links appears temporary, points out BMI Research, a Fitch Group company.
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.
The opening of world-scale Hamad port this year, already one of the largest in the region, has been critical to supporting imports through the blockade.
A government-reported uptick in manufacturing sector growth (to 2.7% in July, from 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.
Qatar’s banking sector also remains resilient with high asset quality and strong capitalisation. The impact on banks’ balance sheets was mitigated by liquidity injections by QCB and increased public sector deposits.
Experts also believe Qatar with its strong fundamentals will outperform its peers in the GCC region this year in view of its economic diversification, while Saudi Arabia will enter contraction amid oil production cuts and spending rationalisation by the government.
Another big plus for Qatar is that its debt burden is still low on a global comparison, amounting to 45.9% of GDP as at end-2016, allowing the country space its borrowing without risking deterioration in its sovereign profile.
Rising hydrocarbon revenues will cause Qatar’s budget deficit to narrow in the quarters ahead, despite the upward pressure on spending caused by the ongoing diplomatic crisis in the region. Although Doha may see borrowing costs rise as a result of heightened political uncertainty, it faces limited risk of any credit event, as its debt burden remains low and its ability to defend the riyal’s dollar peg is retained, BMI noted.
Qatar’s economy remains one of the strongest in the Middle East and North Africa region despite the blockade by some neighbouring countries, according to QNB, the region’s largest financial institution.
Hydrocarbon exports have continued uninterrupted, new trade routes have been established and the authorities are eager to attain a higher degree of economic self-sufficiency.
While the blockade initially disrupted some economic activity, its impact has dissipated. Over the medium-term, QNB expects the Qatari economy will prove resilient.
Domestic industries will benefit from increased self-reliance while the government’s plans to expand liquefied natural gas (LNG) production and a renewed drive to attract international tourists will drive future growth.
