Driven by strong growth in construction, financial services and trade, restaurants and hotels, Qatar's economy has accelerated in the first months of 2014, according to figures released by the Ministry of Development Planning and Statistics (MDPS). Qatar real GDP growth has accelerated to 6.2% with the non-hydrocarbon sector expanding by 11.5% owing to rapid progress with the implementation of major projects.
According to QNB Group, real GDP growth will continue to pick up during 2014 as hydrocarbon production stabilizes and non-hydrocarbon growth remains high. Overall, the new GDP data are in line with expectations for real GDP growth of around 6.8% in 2014. In 2015-16, QNB expects momentum to continue to gather steam owing to the ongoing implementation of major projects, with growth rising to an average of 7.7%.
Strong growth in the non-hydrocarbon sector has been driven by a pickup in major infrastructure investment projects since the middle of 2013. This has led to rapid growth in construction, which has expanded by 19.6% and contributed 2.3% to overall growth. Rising project activity has also led to a rapid increase in the number of workers being employed in Qatar, pushing up population growth to 11.6% by end of March 2014. In turn, this has helped boost growth in services sectors. Services contributed 4.2% to total real growth, with sectors such as financial services and trade, restaurants and hotels fairing particularly well.
Looking forward, a number of major projects are well underway, notably the new metro in Doha, major real estate projects in and around Doha, such as Musheireb in the center of old Doha and Lusail to the North, and new roads, highways as well as a further expansion of the new airport. Completion of most of these major projects is scheduled from around 2018. The implementation of these projects is, therefore, likely to continue to drive growth, directly through higher investment spending, and indirectly as an increasing number of workers are attracted to work in Qatar. Based on planned projects, QNB Group expects population growth to average 10.1% in 2014 and to remain strong going forward to support infrastructure development. Such high levels of job growth should boost domestic consumption, supporting the services sector and providing further impetus to non-hydrocarbon GDP growth.
Strong domestic demand from investments and private consumption has driven double-digit non-hydrocarbon growth in the first months of 2014. The share of investment in GDP has risen driven by the implementation of major projects in preparation for the FIFA 2022 World Cup.
The share of private consumption to GDP, always according to QNB Group, has risen to 11.5 % in Q1 2014. The share of private consumption remains low by international standards, but is expected to rise over the medium term.
All GCC markets have exhibited positive performance in July. Dubai's benchmark index was the top performer, surging 22.6% month-on-month. Dubai remains the best performing regional index so far in2014 with a gain of 43.4% followed by Qatar (+24.1%).
In Qatar, foreign institutions have turned net buyers in July. After selling $46.6 million of equities in June on a net basis, foreigners bought $137.3 million in July, restoring the positive injections recorded in April and May. So far, foreign institutions have bought (on a net basis) $2.02 billion in 2014, compared to a total inflow of just around $700 million in 2013 and outflow of approximately $900 million in 2012.
Overall CPI inflation falls to 2.8%
Qatar's Consumer Price Index (CPI) fell to 2.8% year-on-year in June 2014, from 3.4% the previous month. Falling international food prices were the key factor behind the slowdown in foreign inflation, according to the QNB report.
Overall, foreign inflation has contributed 0.4% to overall inflation in June 2014. QNB expects further growth in population to drive domestic inflation, leading to a modest rise in overall inflation to 3.4% for 2014 as a whole.
However, there is a small risk that the fast-growing economy could lead to supply bottlenecks owing to limited domestic logistics capacity, pushing up inflation more than expected.
Foreign merchandise trade balance registers a surplus
Qatar's foreign merchandise trade balance registered a surplus of QR32.3bn in June. The surplus has fallen1.3% year-on-year due to a large increase in imports (23.3%), reflecting strong domestic demand. Meanwhile, merchandise exports have grown by 3.3% on high gas and oil prices.
Total exports in June have stood at QR41.5bn and imports at QR9.2bn. Japan tops the export destinations in June accounting for 26% of Qatar's exports, followed by South Korea (18%) and India (11%). The UAE was the largest exporter to Qatar in June (13%), closely followed by China (11%) and the US (10%).
Domestic demand in Qatar growing strongly facts and figures
Qatar real GDP growth has accelerated to 6.2% with the non-hydrocarbon sector expanding by 11.5%
GDP growth will rise to an average of 7.7% in 2015-16.
The share of private consumption to GDP has risen to 11.5% in Q1 2014.
Qatar's Consumer Price Index (CPI) falls to 2.8% year-on-year in June 2014, from 3.4% the previous month.
Further growth in population will drive domestic inflation, leading to a modest rise in overall inflation to 3.4% for 2014 as a whole.
Qatar's foreign merchandise trade balance registers a surplus of QR32.3 bn in June