Dh317bn spend for World Cup

Qatar will be spending around $86.5 billion (Dh317.455 billion) on infrastructure development over the next decade to host the 2022 World Cup, nearly 57 per cent more than the government estimates of $55 billion, Shuaa Capital said in a research report.

According to the Dubai-based investment bank’s estimates, the biggest projects to be embarked on by the emirate will be $25bn rail network and another $20bn will be pumped into development of new roads in the country, accounting for more than 50 per cent of the total planned expenditure.

Among other major infrastructure projects, the Qatari government will be investing $17 billion in hotel and tourism infrastructure; $11 billion in airport; $5.5bn for deep water seaport; $4 billion in the construction and renovation of 12 stadiums’ $3 billion to build Qatar-Bahrain causeway and $1bn on crossing from airport to Doha.

Shuaa estimates also surpass those of Meed, which projected $55-60 billion investments in construction prior to the 2022 World Cup. Qatar is also expected to add nearly 80,000 new hotel rooms over the next 12 years.

“From a fiscal perspective, Qatar should be able to finance the projects relatively easily. Our estimate of $86.5bn over 11 years works out at eight per cent of 2009 GDP in expenditure per year, but some of this infrastructure spend would have taken place over the next decade in any case. Qatar’s budget surplus has averaged about 10 per cent of GDP for the last 4-5 years, and we do not expect this to change significantly going forward, leaving plenty of room for additional World Cup related spending,” Shuaa analysts said in the note.

Shuaa projected that Qatar’s GDP growth will double to 16 per cent this year from 8.6 per cent last year; but will slow slightly to 14 per cent as liquid natural gas (LNG) projects are completed and come online.

Most of the tourism and infrastructure projects are unlikely to be initiated much before 2015, Shuaa said.

It expressed concern about possible jump in inflation and external debt level for the next five to 10 years.

Two areas of concern that we highlight are the possible impact on inflation and external debt levels over the next 5-10 years. “Inflation in Qatar dropped sharply on the back of the financial crisis and consequent drop in real estate prices and rents, and is close to zero.

However, given the small size of Qatar’s economy (just under $100bn in 2009), there is a risk that the aggressive investment in infrastructure could push up production costs, while the inflow of expatriates to work on the new infrastructure projects would push up demand-driven inflation.

We do foresee a gradual rise in inflation in Qatar over the next two years (off a low base), to around 3-5 per cent, but there is a risk that it could accelerate faster over the medium term.

“We stress that these inflation and external debt risks are not something that we are concerned about over the next two years, but rather something to keep an eye on over the medium term as World Cup related spending gathers pace towards the end of the decade,” analysts said.

According to Shuaa, the sectors will benefit most from the upcoming construction boom include banking, construction, transport and logistics, telecommunication, district cooling and steel and cement, among others.

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