Qatar’s GDP is projected to reach 3.4 percent this year from 2.7 percent in 2016, driven by greater non-oil growth and new output from the Barzan gas project, the International Monetary Fund said.
The growth is expected to reflect expansion in the Gulf state’s non-hydrocarbon sector, due to spending related to the 2022 FIFA World Cup, the Fund said.
Qatar’s macroeconomic performance has been adversely affected by the oil price slump, despite the availability of substantial buffers.
Growth slowed to 1.7 percent (year-on-year) during the first half of 2016 and inflation rose, climbing 2.2 percent YoY in October 2016, in part due to higher domestic energy costs.
However, the country is “effectively adjusting to the new reality of sustained lower energy prices,” the IMF said, adding that fiscal adjustment planned in 2017 following the oil slump is “moving in the right direction.’
The main external risk facing Qatar is the possibility of hydrocarbon prices remaining low, the statement said.
The likelihood of further interest rate hikes by the U.S. Federal Reserve may also complicate efforts to boost economic growth, through slower government spending and tighter liquidity in the banking sector. The Fed raised interest rates to a 0.5-0.75 percent target range last month, signaling more aggressive monetary tightening for 2017.
Going forward, Qatari authorities will need to carefully manage liquidity pressures, the Fund warned, noting that increasing transparency of Treasury bill auctions and improving communication on the central bank’s liquidity operations would benefit the banking sector.
The IMF also recommended deepening domestic financial markets to promote saving and offer borrowing and investment opportunities.
“Qatar has continued to develop its domestic debt market, deepest in the GCC region, by issuing bonds and sukuk in September 2016, even though secondary trading is very limited. Building on Qatar’s strategic plans, the deepening of domestic financial markets should be actively pursued,” it said.