HE Sheikh Abdulla bin Saoud Al Thani, Governor of Qatar Central Bank (QCB) has stated that Qatar’s economic outlook is positive and the growth is expected to recover significantly in the second half of 2019.
“While many high-frequency indicators such as industrial production index (IPI), particularly manufacturing, PMI and others have shown a marked improvement in the recent period, hydrocarbon production is also slated to increase around the end of 2019 from new project coming on stream. ”, the QCB Governor said. Citing IMF report Sheikh Abdulla added that Qatar’s GDP is expected to grow by 2.0 percent in 2019.
In an interview with the Euromoney, ahead of the latest edition of Euromoney Qatar Conference, the QCB Governor noted that the contraction in Qatar’s Q2-2019 GDP growth was due to a combination of global and domestic factors. Despite supply cut by the Opec plus group, the global economic slowdown continued to weigh on energy prices and imports of many advanced and emerging market economies. In terms of domestic factors, the expected ongoing cyclical downturn in the construction sector contributed negatively to non-hydrocarbon sector growth.
Sheikh Abdulla noted that the economic outlook for 2020 remains positive as the number of policy measures undertaken in recent years is expected to boost overall economic growth and business sentiments. Favorable macroeconomic fundamentals and financial stability will also provide growth enabling the macroeconomic environment. The external account surplus and fiscal buffer provide the necessary macroeconomic strength in Qatar. In fact, as per the latest IMF – WEO report, Qatar’s GDP growth is projected to improve to 2.8 percent in 2020, which would be one of the fastest in the GCC region.
Furthermore, he added, the economic growth is expected to be broad-based, driven by the recovery in both hydrocarbon and non-hydrocarbon sector. The hydrocarbon sector is likely to grow in tandem with the planned expansion of energy production in the next few years, which itself would have a catalytic impact on the non-hydrocarbon sector. At the same time, a number of policy measures undertaken to help economic diversification will boost economic growth in the non-hydrocarbon sector.
These policy measures include steps undertaken to promote wholesale trade, small and medium scale enterprises, and agriculture and allied activities; the new FDI law; and setting up of investment promotion agency to attract foreign investment in Qatar.
Major infrastructure developments such as the SEZs and Hamad Port will provide further momentum to international trade and investment. The network of express highways and logistics centers that are located strategically in various locations of the country will help in the economic diversification process.
The QCB Governor pointed out that Qatar has been one of the 20 countries in the world in terms of improvement in terms of ‘ease of doing businesses’ in the latest World Bank report.
Responding to the question “Will there be more bank consolidation in Qatar?” the QCB Governor said: “Consolidation of banks take place either as a directive from the authorities (Central bank, Government, etc.,) to maintain financial stability or as a business strategy of the participating banks to reap the benefit from improved efficiency through diversification of balance sheet. The merger of two banks in Qatar was of the second type, where the banks came out with the consolidation proposal and Qatar Central Bank provided the necessary approval after conducting legal and financial due diligence.”.
As a regulator of the banking sector, QCB is focused on the viability of the proposal as well as its impact on the overall stability of the banking sector. Thus, the possibility of further consolidation of banks depends solely on the individual bank’s business strategy and for the central bank it is not desirable to stifle the creativity and drive for the efficiency of the banking sector, he added.