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For Qatari residents: Do you prefer a summer or winter World Cup 2022?




Investment spending supports Qatar’s growth

Written by  Author |   Fri, 26 August 2016 05:05

 

QNB Group has published its Qatar Economic Insight July 2016 report. The report examines recent developments and the outlook for the Qatari economy as it continues its strong growth based on non-hydrocarbon investment spending. 
 
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, the real GDP growth is expected to accelerate from 3.3% in 2016 to 3.9% in 2017 and 4.2% in 2018 with the ramp up in investment spending and initial gas production from the Barzan gas project. 
 
Oil prices are expected to recover over the medium term, averaging USD41/barrel in 2016, before rising gradually to USD51/b in 2017 and USD56/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% in 2016 and 3.4% in 2017 in line with the pick-up in global inflation, before moderating slightly to 3.0% in 2018. 
 
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% 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% in 2016 and 9% in each of 2017 and 2018, supported by project lending and higher consumption from the rising population. 
 
The loan-to-deposit ratio is expected to stabilize at around 120%; 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. 
 
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