Qatar growth 'set to slow'

May 22, 2015 8:42 AM

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DUBAI: Qatar's economic growth will slow next year and it faces an increased risk of lower oil and gas prices due to weaker global demand, but the overall outlook for its economy is positive, the International Monetary Fund said yesterday.

The world's top liquefied natural gas exporter saw its economy expand at a double-digit clip in 2011 and it plans to spend heavily on infrastructure projects.

"The economic outlook for 2012 remains positive, despite increased external risks. Real gross domestic product (GDP) growth rate is projected to moderate to six per cent in 2012," the IMF said in a statement after concluding its annual consultation with Qatar on December 1.

Qatar's development planning authority said in October it expected real GDP growth to slow to 5.1pc in 2012 from a projected 15pc for this year, as a decades-long gas expansion programme winds down.

"While real hydrocarbon GDP will slow down to less than 3pc due to the country's self imposed moratorium on development of new hydrocarbon projects until 2015, large infrastructure investment and increased production in the manufacturing sector will boost growth in real nonhydrocarbon GDP, which will accelerate to 9pc," the IMF said.

Qatar's outlook remains positive over the medium term, the IMF said, but warned of external risks.

"The principal risks ahead are lower oil and gas prices as a result of a decline in global demand, disruption in transportation of LNG due to increased geopolitical tensions, but the government has adequate financial cushions and a policy framework in place that would mitigate potential risks."

The fund slightly reduced its estimate of Qatar's inflation compared to projections in its Regional Economic Outlook, released in October.

"Following an average deflation of around 2.5pc in 2010, inflation is expected to average at 2pc in 2011, with the negative rental inflation being more than offset by increases in domestic prices of petrol, and the impact of global food prices," the IMF said.

In its October forecasts, the IMF had predicted average inflation of 2.3pc in 2011 and 4.1pc next year.

Qatar said in September it would hand out salary, pension and benefit increases to state and military employees costing as much as 30 billion riyals ($8.2bn), following social unrest elsewhere in the Middle East and North Africa.

"Headline inflation remains subdued, but inflation risks have risen somewhat due to a permanent increase in public sector wages, which underscores the need for fiscal policy to monitor aggregate demand and the central bank to manage liquidity," the fund said.

The IMF said the salary and pension hikes would add an estimated $1.6bn to government expenditure in the budget for the 2011/12 fiscal year.

"Closing regulatory gaps in the financial system and continuing with efforts to develop the domestic bond market are needed to further strengthen financial stability while developing the financial system," the IMF added.


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