Q3 2015 Qatar Market Report: Economic Overview
The continuing fall in oil prices throughout 2015 has resulted in reduced income from the hydrocarbon sector, which has been the primary driver of the Qatar economy. QNB’s Qatar Economic Insight, published in February 2015, also stated that hydrocarbon production fell throughout 2014, due in part to a moratorium on further gas exploration in the North Field.
Economic growth in Qatar was estimated at 6.5% in 2014. This was driven by double digit growth in the non-hydrocarbon sector (11.9%). Over the same period the hydrocarbon sector declined by an estimated 1.3% on the back of falling oil prices. Despite lower oil prices, the Qatar Economic Outlook 2015 – 2017 published by the Ministry of Development Planning and Statistics in June 2015 states that real economic growth is expected to increase to 7.3% this year due to strong performance in the non-hydrocarbon sector and upstream hydrocarbon production from the Barzan gas project.
While Qatar’s economy is in a strong financial position to withstand a temporary decline in oil prices due to a high level of reserves, the extended fall in oil prices has led to a reviews of government spending in some sectors. Notwithstanding this, the government has committed to the programs and projects set out in the National Development Strategy 2011-16.
This has set out a program for major infrastructural projects, with an allocated budget of QAR 200 billion. Qatar’s government is in the process of changing the end of its fiscal year from March 31 to December 31st. Earlier this year, the Ministry of Finance confirmed that the government ran a QR137 billion ($37.62 billion) surplus during its most recent fiscal year – a 19-percent jump from the QR115 billion ($31.57 billion) surplus recorded in 2013-14.
Despite fears of cuts in government budgets, the Ministry of Finance confirmed that revenue and expenditure forecasts for the next nine months will be kept on par with the last fiscal year. Based on QSA figures, the population hit a high of 2.37 million in May 2015, before experiencing a seasonal fall throughout the summer months. This represented a 12 month increase of 9.2%. The increasing population is generating significant demand for new residential real estate development, and is also fueling growth throughout various sectors of the economy, not least in services such as finance, hotels and restaurants, and trade and transport.
According to the MDPS Qatar Economic Outlook 2015 – 2017, inflation is forecast to average 2% in 2015. The annual inflation rate in Qatar averaged 3.56% from 2005 until 2015, reaching an all-time high of 16.59%in June of 2008 and a record low of – 9.96% in December of 2009. The major concern in relation to Qatar’s inflation rate is the housing market, where rents have been increasing due to an undersupply of accommodation. There are also major concerns about construction cost inflation, which according to an independent report by EC Harris could potentially peek at 18% during a World Cup building boom between 2016 and 2019.
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