Higher energy prices should see Qatar’s budget surplus widen to 12.8% of GDP this year from 0.2% of GDP in 2021, according to National Bank of Kuwait (NBK).
The Ministry of Finance announced a moderately expansionary budget for FY22/23, raising spending by 5% on higher capital and current expenditure outlays compared to the previous budget, as it looks to strike a balance between greater fiscal restraint going forward and supporting economic growth and development objectives, NBK said.
Realised revenues are likely to be substantially higher than budget approximations, which are based on a conservative oil price of $55/barrel.
The economic recovery would allow the government to unwind the remainder of its Covid-19 support measures, including the blanket loan moratorium, NBK said in a recent country report.
Qatar’s economy returned to growth in 2021, with GDP up 1.5%, on stronger consumer demand and lessening Covid-19 disruptions.
The swift recovery was underpinned by government support measures (a $21bn stimulus package followed by a rapid vaccination rollout) and higher energy prices.
Growth is expected to accelerate to 3.7% in 2022 as the non-oil sector expands 5.5% amid a boost to the travel, hospitality, logistics and business support sectors from the FIFA World Cup. The event could attract around 1.5mn visitors in November-December, equivalent to 50% of the country’s population of almost 3mn.
Improved private sector activity was evident in the purchasing managers’ index survey reading for April, which reached an all-time high of 63.6 led by reportedly strong conditions in the construction sector and rising work backlogs.
Robust and broad-based credit growth of 11% in 2021 also points to an expanding private sector, while activity in the real estate market has shown signs of recovery after several years of decline. The Qatar Central Bank’s (QCB) real estate price index gained 2.6% year-on-year in March 2022.
Underpinning the medium-term outlook for the non-oil economy is the ambitious Qatar National Vison 2030 programme of large infrastructure investments in strategic sectors such as manufacturing, finance, and tourism.
While some $30bn in natural gas-related projects are planned, NBK said it does not expect to see major output gains until the first phase of the North Field gas expansion project is complete in 2026, which should deliver a 43% increase in LNG volumes to 110mn tonnes per year and bolster Qatar’s position as the leading global LNG exporter.
According to NBK, previously strong debt issuance ($18.6bn in bonds and sukuk in 2021) could moderate in 2022 with little need for deficit financing and amid a rising interest rate environment.
“However, Qatar will still likely make sizeable debt issuances over the medium term to finance its gas expansion plans,” NBK said.
A solid economic growth outlook, coupled with higher hydrocarbon receipts, should see the public debt ratio ease over the medium term.
Gross central government debt (excluding GREs) is expected to fall to 47% of GDP in 2022 from 55% in 2021.
Qatar’s credit standing remains robust (AA- by Fitch), backed by large external reserves and a good track record of effective policy-making, NBK noted.