Global Investment House – Qatar Economic & Strategic Outlook III–GDP & Public Finance - Qatar has achieved another year of record performance by registering a stupendous growth of 20% in its GDP for the year 2004. GDP reached to QR103.56bn (US$28.45bn) in 2004 up from QR86.27bn (US$23.7bn) in 2003. <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Qatar’s nominal GDP is estimated to have grown at a CAGR of 12.5%. The sharp growth in its GDP boosted its GDP per capita to a record level of $38,241, the highest in the Middle East. With this Qatar now ranks as one of the world's wealthiest countries, trailing only Luxembourg and Norway. The latest GDP estimates of the Planning Council for the year 2004 also included revised GDP data for the year 2002 and 2003. Apart from the strong crude oil prices, the major factors behind this rapid GDP growth were increased exports of oil, LNG, petrochemicals and related industries.
Table 1: Gross Domestic Product
|
|
|
2002 |
2003 |
2004 |
1H 2005 |
|
GDP at Current Prices (Nominal) |
QR mn |
71,733 |
86,273 |
103,563 |
30,908 |
|
GDP at Current Prices (Nominal) |
US$ mn |
19,707 |
23,701 |
28,451 |
8,491 |
|
Nominal GDP Growth |
% |
11.1 |
20.3 |
20.0 |
6.8 |
|
Real GDP Growth |
% |
7.3 |
3.3 |
8.7 |
NA |
|
Production of Crude Oil |
mn bpd |
0.65 |
0.74 |
0.78 |
0.79 |
|
OPEC Crude Oil Basket Price |
US$/b |
24.36 |
28.10 |
36.05 |
46.71 |
*Source: Qatar Central Bank, EIU, Planning Council, Global Research
Planning Council’s estimates indicate that the nominal GDP grew by more than 20% in 2004 to reach QR103.56bn maintaining the previous year’s growth rate. Strong prices of crude oil and increased production during 2004 had led to the oil & gas sector maintaining a record of double digit growth rate in 2004 also. However, the growth rate of oil & gas sector was lower in 2004 at 23% as compared to 28% in 2003. At the same time the non-oil & gas sector grew at a higher rate of 15% in 2004 as compared to the growth rate of 10% in 2003. Analysis of GDP by economic activity reveals that contribution of the oil and gas sector improved from 60.4% in 2003 to 62.2% in 2004. The contribution of non-oil & gas sector to the GDP declined in 2004 to 37.8% from 39.6% in 2003. Among the non-oil & gas sectors, the major contributor to the GDP in 2004 were services sector at 8.9%. During 2002-2004, the oil & gas sector achieved a CAGR of 25.7%, while non-oil & gas sector grew at a lower CAGR of 12.4%.
Table 2: GDP by Economic Activity
|
(in QR mn) |
2002 |
% of GDP |
2003 |
% of GDP |
2004* |
% of GDP |
CAGR %
|
|
Oil & Gas Sector |
40,717 |
56.8 |
52,130 |
60.4 |
64,365 |
62.2 |
25.7 |
|
Agriculture & Fishing |
181 |
0.3 |
201 |
0.2 |
202 |
0.2 |
5.6 |
|
Manufacturing |
5,075 |
7.1 |
4,927 |
5.7 |
6,512 |
6.3 |
13.3 |
|
Electricity & Water |
966 |
1.3 |
1797 |
2.1 |
2,324 |
2.2 |
55.1 |
|
Building, Construction & Real Estate |
5,982 |
8.3 |
7,086 |
8.2 |
8,045 |
7.8
|
16.0 |
|
Trade, Restaurants and Hotels |
3,882 |
5.4 |
4,346 |
5.0 |
5,165 |
5.0 |
15.3 |
|
Transport & Communications |
2,489 |
3.5 |
2,911 |
3.4 |
3,422 |
3.3 |
17.3 |
|
Finance, Insurance & Business Services |
3,334 |
4.6 |
3,885 |
4.5 |
4,279 |
4.1 |
|
|
Services |
9,107 |
12.7 |
8,990 |
10.4 |
9,249 |
8.9 |
0.8 |
|
Total Non Oil & Gas GDP |
31,016 |
43.2 |
34,143 |
39.6 |
39,198 |
37.8 |
12.4 |
|
Total GDP |
71,733 |
|
86,273 |
|
103,563 |
|
20.2 |
|
% change |
11.1 |
|
20.3 |
|
20.0 |
|
|
* Preliminary estimates by the Planning Council
Source: Qatar Central Bank, Planning Council and Global Research
The current buoyant crude prices and higher oil production should further boost the economic growth of Qatar. Apart from that, the government’s efforts to diversify the revenue base are likely to bring fruits in the coming years as almost all the sectors in the economy are buzzing with activities. This is mainly backed by the increased infrastructure spending by the government and increasing participation of the private sector entrepreneurs. The government has set a nominal GDP target of US$69bn by 2011 which is more than twice of what it achieved for the year 2004, and implies an annual GDP growth of 13.5% till 2011.
The hydrocarbon sector accounts for the principal source of the government revenues. Apart from that the government also derives revenues from investments, in the form of dividends from banks and companies. Other sources of revenues are customs duties, taxes and charges. The major components of government expenditures are salaries & wages of the public sector, interest payments on borrowed funds and other current and capital expenditures.
As per the preliminary data released by the QCB for the year 2004-05 the state had recorded a positive balance for the fifth successive year. The provisional figures by the QCB shows an estimated surplus for the year 2004-05 despite an increase in spending to meet growing domestic needs. The revenues have grown to QR49.6bn in 2004-05 from QR30.7bn estimated for 2003-04, an increase of a robust 61.3%. The total expenditure grew by 30.5% to QR35.3bn in 2004-05. As the percentage increase in expenditure was lower than percentage increase in revenue, the recorded surplus of QR14.3bn was almost four times higher than the surplus of QR3.7bn achieved in the preceding fiscal. This large surplus could be mostly attributed to the surge in oil and gas exports and also due to higher oil prices. In 2004-05, Qatari crude oil averaged around $38.48 per barrel, which was more than double of the country's conservative oil-export price of only US$19 per barrel considered for its budget 2004-05.
Qatar's budget for the fiscal year 2005-06 is ambitious in nature. This is true of both expenditure and revenue. The government also expects to register a marginal surplus. The revenue for the financial year 2005-06 is estimated at QR38.03bn, while expenditures are estimated at QR37.8bn and thereby projecting a marginal surplus of QR218mn. Qatar has earmarked a whopping QR11.73bn for public projects for the fiscal year 2005-06. The figure was QR8.88bn in 2004-05. The allocation made for public ventures in the budgetary estimates for 2005-06 is QR2.85bn, or 32 per cent, more than that in the previous budget. Infrastructure projects have this year grabbed a lion’s share of the allocations or a hefty QR9.98bn as against QR7.75bn in the last budget. Land reclamation has been added to the long list of infrastructure projects that include roads, sewage and sanitation and communications. Key projects that are planned to be funded include an industrial area for small and medium industries and 2,270 housing units for people in limited income brackets. Education accounts for second largest share in the budgetary allocations, at 13 per cent of the total, or QR4.863bn. Healthcare ranks next, with a 10 per cent share, or QR3.821bn, in the total earmarking.
In comparison to 2004-05, the budget for the fiscal year 2005-06 estimated that the revenue to grow by 45% while expenditures have been estimated to grow by 33%. The budget estimated to achieve a surplus of QR217mn as compared to a deficit of QR2.16bn budgeted for the year 2004-05.
Qatar is increasingly becoming a primary supplier of LNG in the world. Actual revenue could end up being considerably higher, as officials assumed conservative figures for both oil price and production. The authorities calculated the budget on the basis of a US$27 per barrel. Still, this is significantly higher than fiscal year 2004-05 when the government assumed oil price of US$19 per barrel. If the trend so far in 2005 is any guide, the average oil price would end up considerably higher than the assumed figure for the current fiscal year. Therefore, with favorable economic conditions in the country, strong oil prices, an augmented gas production and export capacity, it is very likely that the 2005-06 budgetary surplus will be higher than what authorities have projected.
Table 3: Summary of Government Finance
|
(in QR mn) |
2002-03 (Actual) |
2003-04 (Actual) |
2004-05* (Actual) |
2004-05 (Budget) |
2005-06 (Budget) |
*Preliminary Data, N A – Not Available
Source: Ministry of Finance and Qatar Central Bank
