Qatar is expected to spend QR55bn per annum for the next five years, even as its planned infrastructure projects have been completed, according to Moody's, an international credit rating agency.
Assuming that capital spending averages around QR55bn per year over the next five years, Moody's expects that total government spending could decline to around 20% of GDP (gross domestic product) by 2027 from an average of 30% of GDP during 2017-21, it said.
Expects the capital spending to be reduced over the next 5-10 years; it nevertheless said the reduction in spending and the ramp up in liquefied natural gas (LNG) have the potential to offset revenue impact on declining energy prices over the longer term.
"Significant spending reduction and higher hydrocarbon output over the next five years would make government finances more resilient to potential future declines in oil prices and, in Moody's view, has the potential to fully offset the negative fiscal impact of moderating energy prices toward the end of the decade," it said.
Although oil prices are expected to remain volatile and eventually decline to around $50-$70 per barrel in the medium term, Moody's view that the geopolitical risk premium related to the military conflict in Ukraine will keep oil prices elevated during the next two years, and oil prices will likely average above the medium-term range well into 2025.
Qatar's national oil and gas company is currently going ahead with its plans to expand the country's natural gas and LNG production capacity. By adding six new liquefaction trains, the project aims to increase Qatar's LNG output by 40% to 110mn tonnes per annum (Mtpa) during 2025-27 and another 15% (to 126Mtpa) during 2027-28.
"The expansion is set to significantly increase the country's LNG exports, the output of natural gas condensate, and the related government revenue," it said.
The LNG exports alone were equivalent to nearly 30% of GDP in 2021, contributing more than 70% to the overall hydrocarbon export mix, and accounting for more than 61% of total goods exports.
On the fiscal side, Qatar's oil and gas revenue (including the portion derived from LNG and natural gas condensate) accounted for more than 80% of total government revenue and were equivalent to around 24% of GDP (gross domestic product).
Highlighting that over the next few years, Qatar's fiscal performance is also likely to benefit from spending cuts; Moody's said the government "significantly" increased its capital spending after 2010, when it won the bid to host the 2022 FIFA World Cup.
A surge in oil and LNG prices since 2020 has generated a large revenue windfall for Qatar, turning its small fiscal deficit in 2020 and balanced budget in 2021 into a large fiscal surplus this year.
Based on the assumption that oil prices average around $100/barrel this year, Moody's estimates that the fiscal surplus will be around 9.5% of GDP in 2022, offering the government an opportunity to reduce its debt burden below the level last seen in 2016, when its outstanding debt was equivalent to around 47% of GDP.
Finding that the government has already used some of the revenue windfall to reduce debt; Moody's estimates that as of September 2022, government debt declined to around 42% of estimated full year GDP (126% of full-year revenue) from 58.4% of GDP (197% of revenue) at the end of 2021 and 72.7% of GDP (222% of revenue) in 2020, and "this level is likely to remain broadly unchanged through the end of the year."