Satyendra Pathak
Doha
Qatar’s strategic investments and planning have enabled it to withstand external economic shocks while maintaining a resilient economy with sustainable growth that has averaged more than 5 percent of GDP growth since 2009, Investment Promotion Agency Qatar (IPA Qatar) CEO Sheikh Ali Alwaleed Al Thani has been quoted as saying by KPMG Qatar.
The KPMG 2022 CEO Outlook surveyed Qatar’s CEOs on their 3-year outlook on the business and economic landscapes.
Despite geopolitical and economic challenges, Qatar’s economic confidence over the next three years is 80 percent. As companies continue to navigate the changing landscape resulting from the COVID-19 pandemic, 92 percent of Qatar’s CEOs expect positive growth expectations in 2022 compared to 88 percent in 2021.
In a report released as part of the KPMG 2022 CEO Outlook Survey, Sheikh Ali said, “Qatar’s economic diversification and business attraction efforts, as guided by the 2030 National Vision, have substantially strengthened the country’s economic prospects. The legacy of the FIFA World Cup Qatar 2022 by raising the country’s profile and spillover effects on non-hydrocarbon industries such as real estate, hospitality, sports, and healthcare will help Qatar maintain long-term sustainable growth and create a wealth of opportunities for foreign investors.
“The hydrocarbon sector is also expected to continue to support the nation’s economy, particularly with the North Field Expansion. These are reflected in the positive long-term growth projections for Qatar by the IMF and World Bank, indicating Qatar’s strong long-term development prospects.”
While confidence is up over the next 3 years, CEOs anticipate challenges in the shorter term. One out of 10 (12 percent) CEOs believe a recession will happen over the next 12 months, but two out of five (16 percent) feel it will be mild and short and 20 percent have plans in place to deal with it.
In spite of short-term recession fears, the increased confidence CEOs have for the longer term indicates they feel well-prepared to navigate their businesses through turbulent times.
In fact, when asked about their confidence in the resiliency of the Qatar economy over the next six months — a period likely to be fraught with uncertainty and constant change — 92 percent still had a positive outlook.
While CEOs may be resilient, they’re also realistic about the challenges ahead. Seventy-two percent of CEOs believe a recession will upend anticipated growth over the next three years, and three-quarters (80 percent) also believe a recession will make post-pandemic recovery harder. Fifty-two percent of CEOs predict a recession will impact company earnings by up to 10 percent over the next 12 months.
Compared to 2019 and 2020, CEOs are better prepared to weather short-term challenges with resiliency measures in place, while still anticipating long-term growth. The top three steps include: boosting productivity (60 percent), managing costs (36 percent), and reconsidering digital transformation strategies (52 percent).
Pandemic fatigue and economic factors including the threat of rising interest rates and inflation top the list of most pressing concerns for CEOs today at 28 percent and 12 percent, respectively.
“As we look to the next three years, risks are more interconnected than ever. Emerging technology rises in rank as the top risk and greatest threat to organizational growth. Supply chain/operational, regulatory, and reputational concerns also jumped into the top five,” the report said.
“The buoyancy of Qatar’s economy is largely driven by the country’s continuous focus on LNG investments where the operating model helps the country to generate huge cash flows. Since renewables have not grown in the last few years at the expected levels, the demand for fossil fuels will continue and hence Qatar’s focus on LNG expansion is expected to put the country in a very strong position for at least the next three decades, fueling CEO’s optimism over their long-term growth prospects,” Gopal Balasubramaniam, Partner, Head of Audit KPMG in Qatar, said.
CEOs indicate that geopolitical uncertainties will continue to impact their strategies and supply chains over the next three years. In fact, 96 percent of CEOs have adjusted or plan to adjust their risk management procedures considering geopolitical risk, and 44 percent of CEOs will be increasing measures to adapt to geopolitical issues to achieve their growth objectives.
With geopolitics a key agenda item in 2022, CEOs need to be knowledgeable on the subject and how to navigate the risks. It’s important to make a geopolitical risk assessment part of their overall strategy.
Qatar Islamic Bank (QIB) CEO Bassel Gamal says that the global economic environment remains uncertain, characterised by a number of challenges including elevated inflation and tightening of monetary policy.
This imposes imported risks and challenges to GCC economies. Similarly, to other GCC countries, there is a positive sentiment in Qatar due to the high oil and gas prices as well as the government’s commitment to invest in the new phase of growth and to further diversify the economy.
In fact, Qatar’s economy is expected to grow by 3.5 percent this year and 3.2 percent next year, making it the fastest-growing economy in the GCC in 2023.
“Qatar’s economy is evolving, becoming more diversified. During the last few years, as the country has been preparing for the World Cup and creating a first-class infrastructure, the focus has been on lending to government projects, but the private sector is growing in strength, and there’s a determination to become a regional leader in education, healthcare, entertainment, and tourism,” Gamal said.
Over the next 3 years, M&A and Strategic alliances remain high despite economic concerns, with 60 percent of CEOs expressing a moderate appetite and 16 percent a high appetite. 80 percent of CEOs see the greatest impact over the next three years from structuring capital allocation, partnerships, alliances, and M&A strategy.
With increasing interest rates and borrowing costs, rapid Innovation will be the key to staying competitive, the report said, deal makers may be taking a much sharper pencil to the numbers and focusing on value creation to unlock and track the deal value, every step of the way.
“The increased investment interest in Qatar creates an opportunity for Family businesses to consider strategic alliances and partnerships to support their growth ambitions and capture greater market share. Family governance still poses a challenge in family businesses given the non-linear growth in families compared to businesses, Yacoub Hobeika, Partner, Audit, KPMG in Qatar, said.
