An outlook from the Kuwait Financial Centre, or Markaz, said the economy of the Gulf state is expected to register a surplus of $28 billion (Dh102bn) in 2008 - its highest in recent history.
Qatar's total revenues are set to hit $106bn - a growth of nearly 22 per cent, thanks to hydrocarbon revenue growth of 28 per cent. Hydrocarbon revenues - fuelled by increasing sales of liquefied natural gas, or LNG - make up nearly 75 per cent of the country's total revenues, said the report.
Nominal GDP in the Gulf state is expected to grow 12 per cent while the country's $78bn expenditure is set to rise by eight per cent, the report added.
Although the country has been averaging more than 20 per cent current account surplus to GDP since 2000, it witnessed an 18 per cent and 16.8 per cent dip in 2006 and 2007 respectively because of increase in imports, the report said.
However, enhanced exports and income from investments are expected to boost current account surplus as a percentage of GDP to 24 per cent. The report said even though crude oil production is expected to post a stable growth rate of three per cent to 0.89 million barrels per day from 0.86 million barrels per day, "the growth is expected to be high" for gas production.
Markaz expects gas production this year to hit 1.3 billion oil equivalent barrels per day - a 34 per cent increase when compared to 0.97 million per day in 2007.
Inflation in Qatar has hit "historic highs", breaking the 15 per cent mark for the first time due to the economy's rate of growth, according to official figures from this quarter. Property rental rates in the country have suffered due to excess demand over low supply in housing, and imports have become costlier due to the fall in the Qatari riyal, which is pegged against the US dollar.
Markaz said it expects Qatar's central bank to continue with the US dollar peg this year, "with some probability of revaluation". The central bank last year was under increased pressure to drop the dollar peg, even through continually rising inflation rates. Due to the Qatari riyal's peg to the greenback, short-term interest rates closely follow those in the United States, with a slight differential.
"Even though not many instruments are available as a benchmark in Qatar (there have been recent additions of treasury instruments), the 3M deposit rate comparison continues to show a negative spread in interest rates," the report stated.
Qatar's stock market has regained all the losses it suffered in 2006, according to Markaz's outlook. In 2007, the Doha stock market fell by 35 per cent, while it gained 33 per cent in 2007 with earnings growth of 24 per cent. The report predicts that price to earnings ratios in Qatar will decline by 13 per cent this year, having increased markedly between 2006 and 2007.
It also anticipates corporate earnings to increase by about 39 per cent in 2007, which provides an upside potential for Qatari stocks of 21 per cent.
The top five companies in Qatar, which form 61 per cent of the total market capitalisation, are expected to witness strong earnings growth of between 30 and 40 per cent.
Among the heavyweights, Qatar Telecom and Qatar Islamic Bank provide strong upside in terms of price appreciation, the report said.
Acquisitions made during the last year are expected to lift bottom line for Qatar Telecom during 2008 leading to an earnings upside of nearly 36 per cent.
The stock's reasonable valuation also provides further upside in terms of price to earning expansion.
The market performance in 2007 was backed by strong growth in volume and value traded - an improvement compared to 2006 when the market saw growth in volume but value traded dipped significantly.
According to Markaz, the volume traded on the exchange rose by 81 per cent last year - similar to the growth in volumes seen in 2006 - with the bulk concentrated in the services segment (48 per cent), followed by the banking sector (41 per cent). However year-on-year growth in volumes was more significant in the insurance sector, which saw a four-fold jump, and in the banking sector, which witnessed 87 per cent growth year-on-year.
The insurance segment also led the growth in value traded in 2007 with a 60 per cent increase as compared to the previous year.
The overall value traded in the exchange increased by 43 per cent as compared to a 27 per cent decline seen in 2006 on a year-to-year basis. The bulk of the value traded also continued to concentrate in the banking and services sectors, at 41 per cent.
According to the report, Qatar's index performance last year was a mirror image of its performance in 2006.
While the index declined by 35 per cent in 2006, it increased by 36 per cent in 2007, which is higher than the long-term returns of 14 per cent.
The industrial index led the gains with 74 per cent increase in 2007 as compared to a 22 per cent long-term performance.
The insurance and banking sector returns were less than the overall benchmark returns at 26 and 28 per cent, respectively.
Qatar set to post $28bn surplus this year