Qatar’s budget surplus to widen in 2011

High oil prices and a surge in LNG exports will largely widen Qatar’s actual budget surplus in the current fiscal year despite an expected surge in expenditure, according to a key Saudi bank.

The Gulf country’s real GDP, which has recorded the world’s highest growth over the past few years, would still maintain high growth of around 17.5 per cent in 2011 before tumbling to nearly 5.5 per cent in 2012, the Saudi American Bank Group (SAMBA) said in its November economic bulletin.

Citing Qatari government data, SAMBA said the country’s fiscal surplus slipped to four percent of GDP in 2010/2011, reflecting the combination of an almost 20 percent increases in spending and a substantial decline in non-hydrocarbons revenues, which offset a healthy 17 percent rise in hydrocarbons revenues.

It said the revenue decline reflected the introduction of a lower corporate tax rate in 2010 and falling investment income, with the latter principally related to the drop in Qatar Petroleum’s profits in 2009 when oil prices slumped.

This resulted in lower dividend payments to the budget in fiscal 2010/2011, the report said, adding that a rebound can be expected in 2011/2012 on the back of stronger hydrocarbon prices and production.

“As is usual, the 2011/2012 budget is based on highly conservative oil prices assumptions of $55, when the actual price is likely to be almost twice that. Consequently the fiscal outcome will be widely different from the presented budget with both revenues and expenditures exceeding targets,” it said.

But it noted that budgeted capital spending remains large, with almost $16 billion set aside for “megaprojects” which will provide a stimulus to growth.

In addition, in September the government raised Qatari nationals’ public sector and military wages and pensions by between 50-120 percent.

With Qataris making up 58 percent of the labour force in government departments, very crude estimates suggest this could add another $two billion to the annual wages and salaries bill, the report said.

“The full impact will not be felt until the 2012/2013 budget with perhaps $one billion added to the $6.9 billion budgeted for this year,” it said.

“Despite the expected large increases in spending, Qatar can comfortably finance its budget. Hydrocarbon revenues will surge this year on the back of stronger prices and higher production and overall we expect the budget surplus will rise back to eight percent of GDP in 2011/2012, with a likely dip to six percent the following year on somewhat weaker oil prices.”

Its figures showed revenues stood at around $44.4 billion in the 2010-2011 fiscal year, which ended on March 31, and expected them to soar to $62.3 billion in 2012. Oil and gas income was put at $26.8 billion in 2010-2011 and is projected to hit an all time high of around $38.3 billion in 2012.

Spending was estimated at $31.6 billion in 2010-2011 and $48.9 billion in 2012, creating a surplus of $5.3 billion and $13.4 billion respectively.

Turning to economy, SAMBA said Qatar’s GDP growth is expected to moderate from 2012 onwards, reflecting the completion of major hydrocarbons projects and a shift towards the non-hydrocarbons sectors as the main source of growth.

“Fiscal policy will remain extremely expansive, backed up by the large revenues from hydrocarbon exports. Annual non-hydrocarbons growth is likely to range around 8-9 percent, while contributions from the hydrocarbons sector will still be felt as projects such as the Pearl GTL come fully on stream in 2012 and work gets underway on the Barzan gas scheme which will provide gas for use by local industries, petrochemical plants and utilities. Overall, real GDP is projected at 5.5 percent in 2012 and four percent in 2013.”

The report showed Qatar’s real GDP surged by 16.3 per cent in 2010 and is projected to leap by 17.5 per cent in 2011.

The current account surplus stood at 16.8 per cent of GDP in 2010 and could soar to 26.1 per cent in 2011 before slipping to 24.6 per cent in 2012.

The report showed the country’s nominal GDP jumped by 32 per cent to $129.8 billion in 2010 and could still soar by 27.8 per cent to $166.2 billion in 2012.

Qatar has the world’s third largest proven gas reserves at around 25 trillion cubic metres after those in Iran and Russia. But it is the top global LNG exporter after completing the completion of mega projects at its gigantic offshore North Field at the end of 2010 lifted output to nearly 77 million tonnes per year.

The surge in its gas income allied with oil revenue and the country’s relatively small population of around 1.5 million to turn Qatar into one of the wealthiest nations in terms of GDP per capita, exceeding $90,000 in 2010.

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