With the ramp up in investment spending and initial gas production from the Barzan gas project, Qatar’s real GDP growth is expected to accelerate to 4.2 percent in 2018. The growth is expected to accelerate from 3.3 percent in 2016 to 3.9 percent in 2017, according to QNB’s “Qatar Economic Insight”
QNB’s July report noted Qatar’s economy has weathered low oil prices due to strong macroeconomic fundamentals including a low fiscal breakeven price, the accumulation of significant savings from the past and low levels of public debt.
According to the report, oil prices are expected to recover over the medium term, averaging $41/barrel in 2016, before rising gradually to $51/b in 2017 and $56/b in 2018 as declining US oil production and steady demand growth are expected to reduce excess supply.
Inflation is expected to rise to 3.2 percent in 2016 and 3.4 percent in 2017 in line with the pick-up in global inflation, before moderating slightly to 3.0 percent in 2018. International inflation is expected to rise on stronger food and oil prices while population growth should support domestic inflation.
According to QNB analysts, lower hydrocarbon revenue and continued capital spending by the government are expected to result in modest deficits in 2016 and 2017,but the rebound in oil prices should gradually bring the government back to near balance by 2018. Revenue is expected to decline in 2016 due to the weakness in oil prices and slower non-hydrocarbon growth, but should pick up over the medium-term due to the introduction of a 5 percent value-added tax in 2018.
The government is expected to continue its investment spending program while rationalizing current spending, leading to a modest decline in expenditure as share of GDP from 2016 to 2018. Credit growth is projected to reach 11.0 percent in 2016 and 9 percent in each of 2017and 2018, supported by project lending and higher consumption from the rising population. The loan-to-deposit ratio is expected to stabilize at around 120 percent; NPLs are forecast to remain low over the medium term as asset quality is expected to be backed by the strong macroeconomic environment.
The outlook for banking is positive with low provisioning requirements and efficient cost bases supporting bank profitability.