Qatar’s economy galloped by around 16 per cent in 2010 and is expected to pick up by more than 19 per cent in 2011 following a surge in the Gulf country’s gas production and public spending, a Saudi bank has said.
Growth in 2010 was far above the 8.7 per cent rate recorded in 2009, when oil prices plunged by nearly $30 a barrel over the previous year, the Saudi American Bank Group (SAMBA) said in its monthly economic bulletin.
In nominal terms, Qatar’s GDP leaped by 24.5 per cent in 2010 and is projected to swell by 22.4 per cent this year because of higher oil prices and LNG output. SAMBA put the nominal GDP at $122.3 billion in 2010 and $149.7 billion in 2011.
“Qatar’s economy continues to thrive as growing hydrocarbon revenues support robust public spending which has helped revive private sector activity. The hydrocarbons sector continued to lead the way growing by nearly 36 per cent in the third quarter on the back of higher oil prices and production,” it said.
But the report noted that the construction sector also experienced a return to growth of 1.9 per cent after steady declines in 2009 and the first half of 2010. This would suggest that the public investment activity is being ramped up as budgeted as nearly $9.7 billion was budgeted in 2010-2011 for strategic infrastructure projects, the report said.
“With the 2022 World Cup in mind, we can expect greater impetus for the implementation of already planned infrastructure projects, particularly in transportation, which should ensure a steady stream of activity,” it said.
“On top of this will be investment in new stadia and hotel facilities, but these are unlikely to materialize for a while yet, given that the event is 12 years away.
Meanwhile short-term growth rates will remain high reflecting new LNG and GTL production, as well as robust public spending, with real GDP expected to accelerate to around 19.6 per cent in 2011.”
SAMBA said the completion of mega LNG projects along with higher oil prices boosted Qatar’s current account surplus from 8.2 per cent of GDP in 2009 to 21.2 per cent in 2010. It projected the balance to rise to 28.2 per cent in 2011.
Fiscal balance slipped from 9.4 per cent to 8.7 per cent due to high spending and GDP growth but it forecast the rate to rise to 9.5 per cent this year.
Turning to inflation, the report said it expected an increase but ruled out a return to double-digit rates recorded through 2008.
It noted that Qatar, the world’s third largest gas power after Russia and Iran, experienced a second year of deflation -2.5 per cent last year, mainly reflecting sustained weakness in the heavily weighted real estate sector which posted another 12.5 per cent decline. Average food price inflation accelerated slightly from 1.3 to 2.3 per cent, while increases in most other components of the consumer price index ranged from 2-4.5 per cent.
“Inflation is beginning to pick up as domestic demand revives and international commodity prices rise…the year-on-year increase in food prices topped four per cent in December – but we do not expect a return to the double digit levels seen in 2007-2008. Although the real estate sector is likely to begin stabilizing during 2011, there is unlikely to be any significant pressures from rents,” it said.
“This will help contain the overall increase in the CPI despite some modest acceleration in other components, including the relatively heavily weighted food element which accounts for around 13 per cent…. overall we project that average inflation will rise only modestly to three per cent in 2011.”