GCC governments have made substantial progress in implementing structural reforms, the foundation stone for a policy environment conducive to diversified economies. Countries across the GCC have progressively reformed their domestic business and foreign investment environments, the World Bank noted in its new “Gulf economic update”. The WB said GCC governments have also implemented reforms designed to facilitate trade and attract foreign investment. Financial sector reforms are accelerating across the GCC. However, a weak global outlook will hamper growth prospects in the GCC.
Weaker-than-anticipated global demand is expected to push oil prices below the previous forecast. Risks to the global outlook are tilted to the downside, with risk originating from potential Opec production cuts, slower-than-expected growth among major economies, and new episodes of financial stress in emerging markets and developing economies triggered by shocks, the report said.
“Measures to diversify away from oil and gas production are beginning to yield results”, Issam Abousleiman (pictured), Regional Director, GCC Countries, Middle East, and North Africa Region, World Bank Group said.
The World Bank noted that Qatar’s economy is projected to grow by a modest 0.5 percent in 2019 before accelerating to 1.5 percent in 2020 and 3.2 percent in 2021. The Barzan Gas Project will boost production by 2 billion cubic feet per day to a total of 11 billion cubic feet per day- a modest but significant addition to Qatar’s total gas production, which reached 176 billion cubic feet per day in 2018.
The $10.3bn project is designed to extract gas from Qatar’s massive North Field via both onshore and offshore facilities. According to World Bank, the new production will go toward meeting the country’s rising power requirements, including for desalination plants, Hamad International Airport and the Hamad Port. In addition to gas, the plant will produce about 6,000 barrels per day of plant condensate, 7,500 barrels per day of butane, 10,500 barrels per day of propane, 22,000 barrels a day of field condensate, and 34,000 barrels per day of ethane to be used as a feedstock for Qatar’s growing petrochemical industry.
The World Bank report also noted that the construction of facilities associated with Qatar’s hosting of the FIFA World Cup in 2022 is winding down. The contracting process for $200bn worth of infrastructure, which had been expanding at a rate of 18 percent per year since the end of 2012, shrank for the first time during the first quarter of 2019, contracting by 1.2 percent year on year. However, service activity is picking up in Qatar, as the event nears. The government has also prepared a new $16.4bn investment program targeting infrastructure and real estate, to be implemented over the next four years. These developments should support economic activity, particularly in the non-oil sector.
According to World Bank, Qatar is the only GCC country expected to post fiscal surpluses for all years of the forecasted (three years) period. Qatar’s surplus is forecast to rise from 1.3 percent of GDP in 2019 to 2.8 percent in 2021. The country was also able to record a fiscal surplus in 2018, which was underpinned by expenditure restraint. Qatar implemented the excise tax on tobacco, energy drinks, and carbonated drinks in 2019. Combined with sustained expenditure control, these revenue measures should enable the government to achieve the fiscal surpluses forecast for the period.