Qatar 2016 – Q3 Economic Overview
Following a turbulent period of fiscal consolidation by the government, recent months have seen a period of relative stability. Oil prices have recovered to some degree, and redundancy programs have eased as public companies and the oil and gas sector, once again show signs of expanding.
Qatar’s economy remains heavily reliant on the hydrocarbon sector, which accounted for more than 30% of total GDP in 2015. Following a fall in oil prices to below $30 per barrel in January, the price of crude oil has recovered to some degree, peaking at approximately $54 per barrel in June. Despite a fall in the price of oil to $43 in August, a quick recovery saw prices re-established above $50 by the end of September. The recovery in oil prices has restored some confidence Qatar’s economy, with a number of recruitment programs recently announced, most notably for 4,000 new staff at Sidra Hospital.
Despite positive macro-economic signs as a result of the increase in oil prices, budgetary restraints and the prioritizing of major development projects is likely to continue for the foreseeable future.
According to the most recent government economic outlook, released by the Ministry of Development Planning and Statistics in June, the fiscal deficit for 2016 is expected to be in the region of 7.8% of GDP. The deficit is expected to remain constant in 2017, but fall to 4.2% of GDP in 2018.
Oxford Economics business group forecasts that non-oil GDP growth for Qatar will remain unchanged at 6.4% in 2017, with LNG growth to be a modest 1%, resulting in overall GDP Growth of 3.6% in 2016.
The inflation rate in Qatar increased to 2.9% in August 2016 from 2.8% in July, fuelled by an increase in household and utilities costs. Trading Economics’ recent projections suggest that inflation is likely to remain at between 3.0% and 3.5% between now and 2020. There are some concerns that inflation might surpass this due to potentially sharper increases in the construction sector as the 2022 World Cup building boom takes hold.
Despite the postponement of certain projects, most major infrastructural projects are progressing as planned, helping to maintain economic growth. The current cost of projects that are underway is QAR261bn, which excludes projects in the energy and private sectors.
A new National Development Strategy for Qatar, covering the years 2017 to 2022, is currently being finalized. The new strategy is said to acknowledge ‘hard budgetary constraints’ and a need for greater co-ordination within the government, as well as empowering the private sector to make up for the shortfall in what has been a government driven economy.