• Qatar’s economy maintains its growth momentum with the constant addition of various projects that further expands the economy

Published June 4th, 2008 - 04:14 GMT

• Qatar’s economy maintains its growth momentum with the constant addition of various projects that further expands the economy
Global Investment House – Qatar  Economic & Strategic Outlook - Macroeconomic Profile- Qatar is one of the fastest growing economies in the world for past many years and to further boost the growth it is committed to spend huge amount on infrastructure and hydrocarbon projects over the coming years. These projects present significant opportunities to almost all the economic sectors such as power, telecom, banking, financial services, real estate, construction and service sectors related to these industries.

Qatar’s economy maintains its growth momentum with the constant addition of various projects that further expands the economy, though year 2007 was a subdued one. Nominal GDP growth has slowed in 2007 to 12.5% as compared to 33.7% in 2006, after witnessing a strong growth of 33.8% in 2005 and 34.8% in 2004. According to recently released preliminary estimates by the Statistics Department of the Planning Council, Qatar's gross domestic product (GDP) at current prices rose by 12.5% to QR232.5bn (US$63.8bn) in 2007 as against QR206.6bn (US$56.8bn) recorded in the previous year. As per preliminary estimates of the Planning Council, Qatari economy is expected to grow by 15.5% in nominal terms in 2008. This tremendous growth of the economy is led by natural gas sector and related industries, which continues to primarily lead the economic diversification efforts. With government’s efforts, the non-oil and gas sector will contribute significantly to the overall GDP, as major initiatives like Qatar Financial Centre, Education City, Qatar Science and Technology Park, Energy City Qatar, Tourism, Construction and Real Estate, Sports, Conferences etc. to diversify the economy come to fruition in the coming years.

Qatar has created a new regulatory environment where businesses can set up in Doha with minimal cost, minimal risk and minimal bureaucracy. Qatar has developed a modern infrastructure-including schools and universities, hospitals, hotels, resorts, shopping malls and sports facilities-while retaining its distinctive culture. Qatar has a modern, progressive outlook and strong international ties across the world.

Analysis of GDP by economic activity reveals that contribution of the oil and gas sector declined from 57.3% in 2006 to 55.7% in 2007. The contribution of non-oil & gas sector to the GDP increased in 2007 to 44.3% from 42.7% in 2006. Apart from the oil & gas sector, all other sectors have witnessed increase in their contribution to the GDP in 2007, with the exception of other services. Qatar’s rapid economic growth will soon see it topping the list of the wealthy countries in the world, as measured by GDP per capita. In 2007, its GDP per capita is estimated to have reached to a record level of $72,444 from US$67,740 in 2006.

Inflation has been one of the biggest worries for the Qatari economy. The Consumer Price Index (CPI) witnessed double digit growth of 11.8% in 2006 as compared to 8.8% growth registered in 2005 while it has registered a growth of 13.8% in 2007. If inflation persists, Qatar needs to restrict increase in current outlays including wages, and phase the implementation of large projects to ease demand pressures. Containing inflation over the medium term calls for restraint on current expenditures and the phasing of development expenditures as part of a well-designed fiscal policy, and for continuing efforts to address problems related to supply-side bottlenecks, especially housing shortages.

As per the World Investment Report 2007 released by United Nations Conference on Trade and Development (UNCTAD), FDI inflow in Qatar for 2006 stood at US$1.79bn. The FDI inflows are expected to increase gradually in the next few years. The main economic stimulus in Qatar is the development of its huge natural gas reserves in the North Field, the largest non-associated natural gas reservoir in the world. Qatar’s liquefied natural gas (LNG) industry has attracted foreign investment worth nearly US$70bn. The oil and gas industry will continue to be the most attractive sector for foreign investors, as Qatar Petroleum plans to invest a further US$80-100bn in upstream and downstream sectors over the medium-term, with much of this will be derived from partnership with global energy giants..

Qatar is expected to continue to perform strongly in 2008, supported by high oil and gas prices and ongoing investments in the gas sector. Inflation is projected to remain high at about 10-12%. The gross reserves of the Qatar Central Bank (QCB) and the external assets of the government and commercial banks are expected to increase further. The fiscal surplus would be considerably higher than budgeted, as the budget is based on conservative assumptions of oil and gas prices. Money growth is expected to continue at a strong pace in 2008, reflecting large increases in the net foreign assets of the banking system and increased credit to finance private and public investments.

Qatar Financial Markets Authority was established in 2006 to regulate the securities market. Now Qatar is planning to bring its financial system under single integrated financial regulatory body. With this initiative, Qatar follows an international trend towards an integrated approach to the regulation of different financial services products and activities. DSM has performed extremely well since the past few years. During 2007, Global DSM Index posted yearly gain of 40.4% and ended the year at 683.99. During 2008 also DSM continued its northward journey as at the end of May 2008 Global DSM index showed a YTD gain of 36.5% or 249.67 points to 933.66 points.

On the back of Qatar’s strong finances and ongoing reforms, international rating agency Standard and Poor’s has assigned sovereign rating of ‘AA-’. Qatar's medium term outlook is very favorable, with continued strong growth expected to be driven by the hydrocarbon sector, as well as by diversification into higher value-added petrochemicals and other sectors such as real estate, financial and service sector related industries. The fiscal and external positions are expected to remain very comfortable. The only downside risks to the outlook is high inflationary pressure.

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