The Ministry of Development Planning and Statistics (MDPS) released today, 19 June 2016, the Qatar Economic Outlook 2016-2018. While the Outlook sees real gross domestic product (GDP) growth strengthening in 2016, it anticipates a contraction in nominal income and a decline in the fiscal and current account surpluses. In 2016 real growth of 3.9% is expected, driven by gathering expansion of the non-hydrocarbon economy and a boost from the start-up of the Barzan gas project. However, real GDP growth is set to taper in 2017 and 2018 as activity in the non-hydrocarbon sector starts to moderate and the added production from Barzan falls out of the equation. With oil prices forecast to remain low in 2016, a reduction of 2.9% in nominal GDP is projected for 2016. In 2017 and 2018 nominal GDP is foreseen to resume growth at 9.0% and 9.1% respectively.
Inflation in 2016 is forecast to moderately pick up in 2016 to 3.4% following rapid acceleration observed in January–April. The recent hikes to petrol prices in January of this year, as well as the removal of water and electricity subsidies in late 2015, will push up domestic prices. A slight pick-up in global commodity prices, and an anticipated softening of the U.S. dollar (to which the Qatari riyal is pegged) will push imported inflation up further in 2017and 2018.
Given significantly lower oil prices and an erosion of hydrocarbon revenues, a fiscal deficit is projected for calendar year 2016, for the first time in 15 years, at just under 8% of nominal GDP. However, if the recent oil price rally persists, investment income will be shielded and the fiscal deficit be lower than anticipated. Breakeven oil prices for the fiscal balance are estimated at $61.5 per barrel for 2016, and above $65 for both 2017 and 2018.
H.E. Dr. Saleh Al Nabit, Minister of MDPS, stated that “The fall in oil prices that began in June 2014 was not anticipated, and the rally that has been staged since January 2016 has been associated with considerable volatility. If they persist, lower oil prices will narrow the government’s fiscal cushion but our considerable financial reserves provide an ample buffer.”
Given lower oil prices, the Outlook expects the current account of the balance of payments to post a small deficit in 2016, but if average oil prices for the year rise by one US dollar, the current account will balance. Surpluses are anticipated to resume with the forecast rebound of oil prices in 2017 and 2018.
Dr. Saleh added that “Lower oil prices and the prospect of continued volatility serve to underline the importance of implementing the initiatives in Qatar’s National Development Strategy. These will help to diversify the economy and to shield it from the vagaries of oil price movements.”
The budget of Qatar 2017
December 15, 2016 The Qatar Ministry of Finance announced the economic budget for the year 2017, outlining the financial outlook for the next year, assuming that the price of oil per barrel in 2017 is $ 45, and the capital expenditure for the non-oil industry will increase significantly. Support for the preparations for the World Cup in 2022 will gradually diversify the government’s economy, as well as the government’s intention to speed up infrastructure spending and spending. The main objective of the 2017 budget is to ensure that major projects related to the 2022 World Cup and other major projects other than those are successfully completed within the expected duration.
The budget is as follows:
- $ 47 billion in revenue
- $ 54 billion in spending
- * Estimated revenue growth of 9% over 2009
- * The fiscal deficit fell by 39.1% from $ 13 billion in 2016
- * Establishment of the Industrial Zone of the Workers’ Hospital Fund
- * $ 26 billion in funding for major projects
- * Major items account for 47% of total expenditure
- * Expenditure on medical and educational facilities projects amounted to $ 24 billion
- * Infrastructure projects pledged $ 103 billion
- $ 13 billion for the construction of new projects
- * 17 new schools and 28 schools are completed
- * The inflation rate remains at an acceptable level
The 2017 budget is in line with the provisions of National Financial System No. 2 of 2015, in line with the instructions of Emir Sheikh Tamim Bin Hamad Al-Thani. It is helpful to increase the efficiency, while maintaining the approval of the appropriation for major projects, which will contribute to the development of Qatar. The budget is consistent with the vision of Qatar in 2030, focusing on the four pillars of economic, social, human and environmental development. In addition, the focus of the budget is to maximize the efficiency of existing expenditures.
The allocation of large projects accounted for 47% of the total expenditure in 2017. This suggests that the government will also sign a new project contract involving rationing projects involving $ 7 billion ($ 25 billion in Côte d’Ivoire) infrastructure; $ 2.3 billion for the World Cup in 2022, $ 2 billion for health and education projects, The total value of the projects in other industries is $ 20. The implementation of major development projects will have a positive impact on economic growth. According to the International Monetary Fund, Qatar will achieve a 3.4% overall domestic growth rate in 2017, which will be the highest level of overseas cooperation. In addition, the implementation of the project will contribute to the development of the non-oil sector, with a high growth rate of 5.8% in the first half of 2016 and $ 24 billion for key sectors of health, education and infrastructure projects, equivalent to the 2017 annual budget 43.9% reflects the continued commitment of the Government to further provide high quality social services. The transportation and infrastructure projects, which are the main pillars of sustainable development, have been allocated to $ 12 billion, or 21.2 per cent of the total budget. For expenditure on key sectors in the budget, 22.7 per cent were allocated for health and education and 56.1 per cent in other sectors. Qatar will maintain its reserves and investments through the issuance of debt by local and other international financial markets to finance the recent fiscal deficits. The government will also continue to work to maintain inflation at an acceptable level through cooperation between the Ministry of Finance and the Qatar Central Bank, through coordination of fiscal and monetary policies, provided that budgetary inflation is still at an acceptable level.
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