Qatar’s growth to accelerate this year; medium-term outlook buoyant on NFE: IMF
June 22 2022 10:03 PM
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Qatar’s economy is expected to accelerate in 2022, with the bright medium-term outlook supported by the North Field expansion (NFE) project, which has the potential to lift the growth by 5.7% cumulatively and add around 3.5% of GDP (gross domestic product) in export receipts per year by 2027, according to the International Monetary Fund (IMF).
"Continued recovery in domestic demand, buoyed by favourable hydrocarbon prices and the start of the NF expansion project, as well as the World Cup induced buoyancy, are expected to boost non-hydrocarbon growth to 4.1% this year," IMF said in its Article IV consultation with Qatar.
With hydrocarbon growth likely reaching 2.3%, real GDP growth in 2022 is expected at 3.4%.
Strengthening domestic demand and higher energy and food prices are expected to push up inflation to 3.5% (period average) in 2022, the report said.
The current account surplus will likely widen further to 20% of GDP in 2022, thanks to high hydrocarbon prices. Over the medium term, the NF expansion project is set to benefit the non-hydrocarbon sector during the construction phase and boost the hydrocarbon sector once production starts, but it will further increase Qatar’s reliance on fossil fuel.
The NFE project is expected to raise Qatar’s LNG output from the current 77mn tonnes per annum (Mtpa) to 110Mtpa in the first phase and to 126Mtpa by the second phase. The first phase is expected to cost around $28.7bn, most of which will be capital spending financed by QatarEnergy, making it one of the industry’s largest investments in recent years and largest single LNG capacity ever built.
By 2027, the NF expansion is expected to raise real GDP by 5.7% cumulatively and add around 3.5% of GDP in export receipts per year. Contribution of the hydrocarbon sector to real GDP and fiscal revenues are projected to increase by 2 ppts between 2021 and 2027.
The construction phase should benefit non-hydrocarbon activities, including in logistics, transportation and manufacturing, adding an average 0.3 percentage points of GDP to non-hydrocarbon growth annually.
The IMF report highlighted that war in Ukraine has spillovers to Qatar through its impact on global commodity prices and financial channels.
"The war has pushed up hydrocarbon prices further, bringing more windfalls to Qatar," it said, adding gas demand from European countries is also likely to increase over the medium term as they diversify away from Russian gas supply.
On the other hand, higher food prices have contributed to higher inflation and could lead to higher food subsidies. While near-term food reserves are reportedly ample, Qatar may need to secure alternative food suppliers as it relied significantly on Russia and Ukraine for wheat and related food imports before the war.
The potential losses from Qatar’s sizeable investments in Russia (through its sovereign wealth fund, Qatar Investment Authority, or the QIA) could also arise.
 
 



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