Qatar is known to have the largest natural gas reserves in the world. With this in mind, and in addition to sustained long-term economic planning, Qatar would continue enjoying robust economic growth. Qatar as well has the highest per capita income in the world crossing the $100,000 mark and a well-capitalized banking sector.
Qatar’s economy is expected to grow 7.7% in 2015, signaling that it expects very little disruption from the oil price plunge which is worrying many energy exporters.
Although a significant oil producer, the world’s top natural gas exporter feels secure and strong because gas prices are only weakly correlated with oil. Even at current oil prices, analysts estimate Qatar's state budget might break even next year; it has huge fiscal reserves to cover any deficits.
The growth of 7.7% in 2015, which was announced by the Ministry of Development Planning and Statistics in a report entitled 'Qatar Economic Outlook 2014 – 2015' would be Qatar's fastest expansion since 2011 and an acceleration from 6.3% in 2014. The ministry did not say what average oil price it was assuming in its predictions. The ongoing development of hydrocarbon processing and export facilities, has helped build a portfolio of petrochemicals, chemicals and fertilizer companies in the nation, building on Qatar's economic strength.
"Solid expansion in non-hydrocarbon activities will continue to drive overall economic momentum, propelled by investment spending, an expansionary fiscal stance and population growth," the ministry said in its report. It said oil prices could become a key risk to the economic outlook if their slide continued, but added that the wider economy was likely to be shielded by the strength of state finances.
"In calendar years 2014-2016, the overall fiscal balance is expected to stay in surplus," the ministry said. "It is, though, set to narrow as public investment spending gathers pace, and as hydrocarbon revenue and transfers of investment income from Qatar Petroleum edge down."
In contrast, the non-hydrocarbon sector has widened by large investments in major infrastructure projects, Qatar’s non-hydrocarbon sector is increasingly driving economic growth, according to QNB Group.
The latest GDP figures confirm Qatar’s ongoing rapid process of economic diversification away from its traditional role as a hydrocarbon exporter towards a manufacturing and services hub.
Huge investments in major infrastructure projects and fast growing population has spurred Qatar's non-hydrocarbon sector. In its latest research note on Qatari economy, citing Ministry of Development Planning and Statistics' (MDPS) data, the QNB Group says that the non-hydrocarbon sector now accounts for over half of its GDP.
The country has over $222 billion worth of development and construction projects currently in the pipeline, and nearing completion. Spending on infrastructure is likely to reach $150 billion in the run-up to the 2022 FIFA World Cup, according to the Oxford Business Group report 'Qatar 2014'.
Major infrastructure projects, notably the new metro in Doha, major real estate projects such as Musheireb in the center of old Doha and Lusail to the north, as well as new roads, highways and the further expansion of the new Hamad International Airport, has resulted in a 18.5 percent year-on-year expansion in construction activity – the fastest growing sector.
In addition, transportation and communication have increased by 10.5 percent year-on-year, predominantly owing to increased passenger flows through the new airport. Financial, real estate, and business services have also grown robustly as banking intermediation has accelerated and real estate services were boosted by the demand for housing for the growing population. Furthermore, trade, hotels and restaurants have also grown strongly (13.7 percent y-o-y) on the back of the growing population, as well as increased tourist activity.
By investing heavily in major non-hydrocarbon projects, the authorities are attracting a new wave of expatriate workers to Qatar. Indeed, population continued its near double-digit growth in 2014, driven by the large ramp up in infrastructure spending. Accordingly, small and medium-sized enterprises, such as hotels, education, medical services, retail and restaurants are expected to flourish in order to cater to the growth of the population. As such, this increased level of population growth would boost aggregate domestic consumption and add to non-hydrocarbon GDP growth going forward.