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Tribune News Network
Doha
Qatar's economic performance remains resilient. Despite the blockade by some of its neighbours, the economy grew by 1.6 percent in 2017. Non-hydrocarbon GDP growth was a solid 3.8 percent in 2017.
For this year, the economy is on course for an overall growth of 2.6 percent and non-hydrocarbon growth of 5 percent, Qatar National Bank (QNB) said in its weekly economic report.
The economy is expected to accelerate further in 2019 with GDP growth of 3.2 percent and non-hydrocarbon growth of 5.3 percent, the report said.
QNB said the GDP growth is forecast to gain by a solid 2.6 percent in 2018 as the drag from the hydrocarbon sector abates and the non-hydrocarbon sector is supported by construction, agriculture, manufacturing, transportation and storage.
Higher oil prices will allow for some positive multiplier effects on domestic demand and also support current account surpluses.
Reflecting recent strength, QNB said it is revising up its oil price forecasts to $72 a barrel in 2018 and $69 a barrel in 2019 (previously $69/b and $66/b).
Strong global demand and various supply disruptions will keep prices firm well into 2019 before slowing global GDP growth and continued increases in US shale supply damp prices somewhat, the report noted.
On the hydrocarbon side of Qatar's real economy, a growth of 0.2 percent is anticipated, which would end four years of declines.
QNB said the lifting of OPEC production cuts should modestly boost crude oil production, while the end of maintenance work and temporary shutdowns should start to spur a recovery in LNG output through the year.
"A further pick up of 0.7 percent in hydrocarbon output is then expected in 2019,"the report pointed out.
QNB said the total non-hydrocarbon GDP growth was a robust 4.9 percent year-on-year (y/y) in 2018 Q1, starting the year on a strong footing.
"Non-hydrocarbon GDP is expected to gain by 5 percent in 2018. For 2019 as a whole, we forecast non-hydrocarbon GDP growth of 5.3 percent,"the report said.
Meanwhile, accounting for 21 percent of non-hydrocarbon output, construction activity was up 17.5 percent in 2017, supported by key infrastructure projects related to Qatar's Vision 2030 and also the 2022 World Cup, the report said.
The construction sector's buoyancy has continued so far in 2018 with the latest data showing output up 17.2 percent y/y in the first quarter.
Growth in the manufacturing sector, which accounts for a further 19.5 percent of non-hydrocarbon GDP, recovered to 1 percent in 2017 as projects aimed at greater self-sufficiency and food security start to take effect.
Their impact can be seen more clearly in recent quarters with manufacturing output growth up 3 percent y/y in 2018 Q1, the report said.
"Government policies to promote private-sector development are also lifting domestic demand. Agriculture (8.2 percent growth), manufacturing (3.2 percent growth), transportation and storage (3 percent growth) are expected to be the key beneficiaries with growth in these sectors expected to pick up further in 2019,"QNB said.
Continued population growth, with mid-year population expected to hit a record 2.81 million in 2018 then rising further to 2.89 million in 2019, will also work to spur additional domestic demand, the report noted.
QNB said Qatar's external finances will be robust. The current account surplus should approach 9 percent of GDP in 2018, an improvement of around 4 percent of GDP in 2017 before subsiding to around 7 percent of GDP in 2019 as oil prices slip.
"However, import growth is expected to remain moderate,"the report said.
Helped by higher hydrocarbon prices, government finances are expected to steadily improve with the budget seen in broad balance in 2018 before a larger surplus emerges in 2019, QNB said.
According to the report, the introduction of VAT in 2019 will lift revenues and help diversify the tax base.
"Reflecting deflation in rental prices and slower food inflation, overall CPI inflation is expected to remain damped until the anticipated introduction of VAT boosts inflation in 2019. We target average CPI inflation of 0.5 percent in 2018, rising to 1.9 percent in 2019,"the QNB report said.
Qatar's banking system remains healthy with ample liquidity, high asset quality and strong capitalisation, the report said.
"Deposit of 6 percent and loan growth of 5 percent is expected this year, which should result in some further decline in the loan-to-deposit ratio."
From 2019 onwards, the decision to increase LNG output by 30 percent by 2024 will increasingly drive Qatar's next development phase, the report pointed out.
"The 30 percent increase will boost Qatar's LNG capacity from 77 million tonnes currently to 100 million tonnes by 2024. This increase in capacity will require substantial investments both onshore and offshore including the construction of three new LNG trains to process the gas,"QNB said.
Beyond the direct impact on non-hydrocarbon GDP, this new investment phase, which should begin in earnest from 2020 onwards, will generate substantial multiplier effects on the wider economy, lifting demand for goods and services and driving the country's development in line with the Qatar National Vision 2030, the report said.
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23/09/2018
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