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29 March 2024

Qatar’s fiscal surplus to widen in 2011-2012

Published
By Nadim Kawach

Strong oil prices will ally with soaring gas revenue to sharply boost Qatar’s budget surplus in 2011-2012 and extend years of positive fiscal balances in the world’s top LNG exporter, according to a local study.

The surge in the hydrocarbon sector and a record high budget approved in March for fiscal year 2011-2012 will also maintain Qatar’s position as the fastest growing economy, with its real GDP expected to soar by around 21 per cent, said QNB Capital, an affiliate of Qatar National Bank.

In a study on Qatar’s socio-economic indicators, QNB Capital said the tiny Gulf country had recorded budget surpluses in every fiscal year since 2000. 

“QNB Capital forecasts that the budget surplus will rise to $8.5 billion (4.9 per cent of GDP) in 2011/2012, easing slightly to $7.5 billion (3.8 per cent of GDP) in 2012/2013,” said the study, which was published this week. “Based on our forecasts for growth and Qatari oil prices, we forecast that actual revenue will rise by 18 per cent to $51 billion in 2011/2012 and by a further 3.8 per cent to $53 billion in 2012/2013.”
It said that despite the increase in the nominal figures, revenue as a percentage of GDP will fall to 27 per cent in 2012/2013 from 34 per cent in 2010/2011.

“This is a consequence of our expectation for overall economic growth to be faster than the increases in revenue.” Qatar assumed a surplus of QR9.7 billion ($2.6 billion) in its current fiscal year, which started on April 1. Expenditures were estimated at QR117.9bn and revenue, mostly from the sale of oil and liquefied natural gas, at 127.5bn. 

Qatar basked in the highest budget surplus during 2009-2010 because of a surge in revenue although the world’s top LNG exporter had projected a deficit. Despite an increase in spending, the fiscal surplus leaped to an all time high of around QR46.3bn in the 2009-2010 fiscal year, which ended on March 31.

Qatar had forecast a deficit of QR5.8bn in its 2009-2010 budget despite a slight fall in planned spending for the year. The deficit was assumed on the basis of a sharp fall in revenue from around QR103.3 billion in 2008-2009 to QR88.7bn in 2009-2010 mainly because of a steep drop in crude prices.

But actual revenue shot up to their highest level of QR165.6bn in 2009- 2010 due to a large increase in non-oil earnings. Expenditure also climbed to a record high of QR108 billion from around QR99.2bn in the previous fiscal year.

Qatar said before the end of 2010 that it had completed mega projects to pump nearly 77 million tonnes of LNG per year and most of them would be exported to at least 20 countries across Asia, Europe and the Americas. The country launched LNG ventures in early 1990s to tap the massive gas wealth of the 6,000-square-km offshore North Field, estimated at around 25 trillion cubic metres, nearly 15 per cent of the world’s total gas deposits.

Besides lifting its economy, the expansion in LNG sales allied with exports of crude oil and related products to turn Qatar into one of the richest nations. According to QNB Capital, Qatar is the fourth largest economy in the six-nation Gulf Cooperation Council (GCC) and the wealthiest in terms of GDP per capita.

Qatar’s nominal GDP leaped by 30 per cent in 2010 to reach $127bn and in terms of GDP per capita, the country is the richest member.
QNB Capital’s figures showed Qatar’s real GDP grew by an annual average of 12 per cent during 2007-2008.

“This was more than double the real growth recorded by each of the other five countries in the GCC…Qatar’s growth also remained well ahead of the other countries during the global downturn and recovery in 2009-2010,” it said.

“Qatar’s strong growth over the last decade has been driven by a steady expansion in oil and gas production. We forecast that real GDP growth will accelerate to 21 per cent in 2011, due to numerous ongoing projects in the private and public sectors. It is expected to slow to 10 per cent in 2012, after a number of these projects have been completed.”

The report expected Qatar’s oil production to average around 809,000 barrels per day in 2011, about one per cent above the 2010 output.
“QNB Capital forecasts that the oil and gas sector will grow by 30 per cent in 2011 and by 13 per cent in 2012 due to output changes to meet demand arising from the recent completion of projects in the gas sector,” the report said.

“We expect the non-oil and gas sector to expand by 14 per cent in 2011 and 7.4 per cent in 2012. This will be driven by population growth and the implementation of a growing number of private and public projects, with confidence buoyed by higher oil prices. The manufacturing sector is expected to achieve 28 per cent growth in 2011 and 8.5 per cent in 2012, mainly due to increases in fertilizers, petrochemicals and GTL output.”