Doha: The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, revealed that Qatar’s economic growth is strong while it still enjoys a boost from the World Cup in 2022. Qatar’s growth likely exceeded 4 percent in 2022, marking the fastest pace since 2015 and leaving the economy the largest it has ever been. However, the 2023 GDP growth forecast is still unchanged at 2.7 percent.
According to the Q1 report, Qatar’s expansion will be led by the non-oil sector this year, though the pace of activity will nearly halve to 3.3 percent, from over 6 percent in 2022. The February PMI reading showed business activity expanding for the first time since September last year, led by stronger demand in the wholesale and retail sector. Firms are feeling optimistic about growth over the coming year, with the 12-month ahead outlook soaring to a 41-month high.
According to the latest figures, there were over 600,000 tourist arrivals in December, the strongest monthly outcome in the series. The influx took the 2022 visitor total to 2.56m, more than four times the 2021 figure overall. ICAEW’s baseline assumes major events, including the Asian Football Cup and Formula 1 Qatar Grand Prix, will limit the drop in arrivals this year, with future expected offerings underpinning medium-term recovery.
Although energy prices are easing from 2022 levels, they will remain elevated, supporting Qatar’s macroeconomic environment. Due to higher prices in main export commodities, Qatar enjoyed one of the largest terms-of-trade improvements in 2022, with recent data showing the trade surplus widening to QAR355.2bn ($97.6bn) last year.
Public spending is expected to remain supportive of growth in 2023. High commodity prices underpinned a 54 percent year-on-year rise in budget revenue in 2022, pushing Qatar’s budget surplus to QAR89bn, the largest since 2014. Qatar’s 2023 budget, based on a reduction in spending and an oil price of $65pb, projects a surplus of QAR29bn, equivalent to 3.4 percent of GDP. ICAEW’s report forecasts Brent at US$86pb in 2023, significantly above the budgeted price. On that basis, a modest rise in spending and a surplus of QAR82bn is expected.
Hanadi Khalife, Head of Middle East, ICAEW, said: “The World Cup provided Qatari authorities with an opportunity to showcase their upgraded infrastructure and build connections, elevating Qatar’s investment appeal and laying the foundations for further diversification.
With the economic boom from the World Cup starting to slow down, GDP growth will be affected. However, continuing to increase investment in the non-oil sectors and doubling down on reforms will help Qatar remain resilient this year and reach the goals charted in its National Vision 2030.” Scott Livermore, ICAEW Economic Advisor, and Chief Economist and Managing Director, Oxford Economics Middle East, said: “Though much of the activity last year was linked to the World Cup, the preparations for the event contributed to medium-term diversification goals through strong gains in construction and real estate, transportation, and financial services.
These gains will slow in the coming year, and some areas of the economy, such as accommodation and food services, may see a dip in the near term.
However, we think the ongoing expansion of gas capacity and the pipeline of planned projects, will draw FDI and support non-oil activity. Further reforms will also play a role in attracting FDI as Qatar keeps up with the growing competition in the region.” Some of the key drivers behind the rise in Qatar’s inflation in 2022, particularly recreation and culture prices, are reversing following the conclusion of the World Cup. Inflation registered a monthly drop of 1.8 percent in January, the biggest in the current series, dragging annual inflation down to 4.2 percent, from 5.9 percent in December. Although housing and transport prices continue to rise, average inflation will ease substantially this year to 2.3 percent, less than half the average pace of 5 percent in 2022.
Qatar’s central bank opted to keep interest rates on hold in February, skipping the hike delivered by the US Fed for the first time this cycle. With inflationary pressures easing, Qatar’s monetary authorities will hesitate to tighten policy further, but ICAEW doesn’t expect rate cuts before 2024.
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