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Satyendra Pathak
Doha
Qatar's total domestic liquidity as measured by supply of broad money (M2) grew by 21.3 percent in 2017, in contrast to a decline of 4.6 percent in 2016, Qatar Central Bank (QCB) has said in its latest report.
This sharp increase in M2 was largely due to growth in Quasi Money, particularly deposits in foreign currencies, the report said adding much of this increase took place during the second half of 2017.
As a result, the report said, M2 stood at QR603.3 billion at the end of 2017 as compared with QR497.5 billion at the end of 2016.
As the growth in M2 far outpaced the nominal GDP growth, M2 to nominal GDP ratio increased significantly to 98.9 percent in 2017 from 89.7 percent in 2016, the report said.
On the other hand, the report said, the narrow money supply (M1) contracted by 4.1 percent during 2017 as against an increase of 1.1 percent during 2016. Both the components of M1, demand deposits and currency in circulation, contracted with the former accounting for 93.2 percent of the decline in M1.
With this contraction, the report said, outstanding M1 at the end of 2017 stood at about QR123.1 billion as compared with QR128.3 billion at the end of 2016. The outstanding M1 amounted to 30 percent of non-oil GDP in 2017 compared with 33.2 percent in 2016. Conversely, nominal non-oil GDP relative to M1 increased to about 3.33 percent in 2017 from 2.9 percent in 2016.
According to the report, Quasi Money grew sharply by 30.1 percent during 2017 in contrast to a decline of 6.4 percent during 2016.
A sharp increase in public sector foreign currency deposits in the aftermath of the economic blockade was primarily responsible for this high growth in Quasi Money, the report said.
Reflecting return to normalcy, foreign currency deposits of companies and institutions also increased significantly around the final months of 2017, the report said.
As foreign currency deposits led the increase in M2, the dollarisation rate (the proportion of foreign currency deposits in broad money supply), rose to 36.6 percent by end-December 2017 from 25 percent at end-December 2016.
The increase in dollarisation rate since June reflected the steps taken to mobilise dollar resources during the second half through the public sector.
The growth in domestic credit decelerated somewhat to 10.3 percent during 2017 from the growth of 12.6 percent recorded during 2016, the report said. The deceleration was due to decline in the growth of credit to public sector to 16.2 percent from the high growth of 23.3 percent recorded during 2016. Within credit to public sector, there was a sharp deceleration in credit to government, while credit to government institutions and semi-government institutions, particularly the latter expanded sharply from the contraction in the previous year.
At the end of 2017, credit to public sector stood at about QR341.6 billion compared with QR293.9 billion at the end of 2016. Credit to private sector, on the other hand, grew by 6.4 percent during 2017, almost at a similar pace of 6.5 percent during the previous year.
Increase in credit to private sector during 2017 was mostly accounted by credit to real estate, services and industry, where the growth in credit also accelerated. In the other remaining sectors, the report said, either there was a deceleration or contraction in the outstanding credit.
As a result of there developments, the report said, the composition of local and foreign currencies in both deposits and credits changed.
In deposits, as foreign currency deposits far outpaced local currency deposits, the share of the former in total deposits increased significantly. On the other hand, as the slowdown in credit growth from the previous year was much sharper for credit in foreign currency than for credit in local currency, share of the latter in total credit increased.
