Qatar’s economy is set to rebound and clock the best rates in the region this year on the back of increasing gas production and restoration of trade and financial flows with its GCC neighbours.
The national economy is expected to see a 3.3% growth for 2021, with the US-based Institute of International Finance (IIF) forecasting Qatar’s hydrocarbon sector to grow 2.2% and non-oil by 4% this year.
Qatar’s lower fiscal breakeven oil prices ($52 per barrel in 2021) and its large public foreign assets provide substantial fiscal space, IIF said.
Also, the authorities (have) rationalised non-priority spending and postponed non-World Cup-related investment projects.
“The fiscal balance will shift from a small deficit in 2020 to a surplus of around 3% of GDP in 2021,” it said, adding that the surplus could swell to more than 4% in 2022.
Last month, Qatar Petroleum (QP) took the final investment decision for developing the $28.75bn North Field East Project (NFE), the world’s largest LNG project, which will raise Qatar’s LNG production capacity from 77mn tonnes per year (mtpy) to 110 mtpy by 2025.
The project will also produce condensate, LPG, ethane, sulphur and helium.
It is expected to start production in the fourth quarter of 2025 and total production will reach about 1.4mn barrels oil equivalent per day.
The NFE project will be one of the energy industry’s largest investments in the past few years, in addition to being the largest LNG capacity addition ever, and the most competitive LNG project in the world.
This project will generate substantial revenues for Qatar and will have significant benefits to all sectors of the Qatari economy during the construction phase and beyond.
The NFE project represents the first phase of LNG expansion in Qatar, while the second phase, referred to as the North Field South Project (NFS), will further increase Qatar’s LNG production capacity from 110mn tonnes per year to 126 mmtpy.
With an expected production start date in 2027, the NFS project involves the construction of two additional mega LNG trains (with a capacity of eight mmtpy each) and associated offshore and onshore facilities.
In relation to Qatar’s GCC neighbours, the contraction in the economy was less severe and the fiscal deficit is much lower, IIF noted.
The economy was not impacted by the Opec+ agreement either as more than 70% of the hydrocarbon exports are in the form of natural gas and Qatar is not part of the oil production cuts, IIF said. The prospects stand to improve further with the resolution of the three-year-long GCC crisis, achieved early this year.
According to FocusEconomics, Qatar’s economy is set to expand this year on ‘stronger’ domestic and foreign demand. Easing tensions with neighbours — Egypt was the latest Arab nation to normalise relations with Qatar in late January — should also provide support.
Combined with the lifting of the blockade early this year, which is set to boost the aviation and tourism sectors in particular, developments in Qatar’s bedrock LNG industry will help achieve significant national growth this year.
