Qatar’s Economy Mirrors Lower Oil Prices

Already overwhelmed by criticism, Qatar’s right to host the 2022 World Cup faced its biggest challenge following the arrest of several FIFA executives and the criminal proceedings in Switzerland. However, Qatar has denied any wrongdoing in the country’s bid for the 2022 World Cup and is committed to using the World Cup as a platform to break down prejudice and misconception. 

 Qatar’s Economy Mirrors Lower Oil Prices 
 Qatar’s Economy Mirrors Lower Oil Prices 

The undertaken projects in preparation for the FIFA World Cup 2020 gave rise to a 4.1% year-on-year (y-o-y) growth in Qatar’s real GDP, in the first quarter (Q1) of 2015.

Real Gross Value Added (GVA) of the mining and quarrying sector, with a 50.77% share of GDP, showed a 0.1% yearly decline, while GVA of the non-mining and quarrying sector grew 7.1%, boosted by double-digit rises seen mainly in construction, trading, hospitality and financial sectors, coupled with over a 9% jump in the country’s population in Q1, 2015.

Inflation was confined at 0.87% y-o-y in May 2015, influenced by 2.27% and 2.85% price rises in “Housing , Water, Electricity & Gas” (21.89% weight) and “Transport” (14.59%). These increases were partly offset by the 6.51% drop in the “Recreation & Culture sub-index. However, inflation is predicted to pick up as the population continues to grow.

On the suppliers’ side, the Producer Price Index (PPI), measuring the average selling prices domestic producers receive for their output, plummeted by 37.4% y-o-y in April, primarily due to the sharp decline in prices of crude oil and natural gas during 2014. The price of the Qatari Land Crude Oil (QLCO) and that of the Qatari Marine Crude Oil (QMCO) shed from $108.1/barrel and $106.5/barrel end of May 2014 to $65.4/barrel and $63.1/barrel end of May 2015. Therefore, the “Mining” group, which represents 72.67% of the PPI plunged by 41.5%. The PPI “Manufacturing” subcomponent also showed yearly decline of 26.8%, while “Electricity and water” sub-index edged up by 2.1%.

As for Qatar’s trade balance, it narrowed by 50.30% y-o-y to $18.40B by end April 2015, as a result of lower exports and higher imports. Declining oil prices drove down the largest component of total exports, hydrocarbons, by 40.57%, inflicting a 37.41% y-o-y plunge in exports to $29.11B by April 2015. On the other hand, imports amplified by 12.91% y-o-y to $10.71B, where motor cars and other passenger vehicles were the top imported commodities, going up by a yearly 21.81% to $1.05B.

On the fiscal front, Qatar’s fiscal surplus is expected to narrow significantly from 12.3% of nominal GDP in 2014 to 1.4% in 2015. This reduction reflects a relatively quick pass-through of lower oil prices on budget revenues. It also mirrors the rise in capital outlays as implementation of the infrastructure program gathers pace.

Looking at the monetary sector, total assets at commercial banks inched up by 1.48% since end of 2014 to $275.30B, by May 2015. Private sector credit amplified by 7.51% to $102.46B, while that of the public sector dropped 7.55% since year start to $58.30B by May. Total deposits posted a 4.89% growth to $170.22B, due to the 3.54% and 42.58% increases in resident and non-resident private sector deposits that partly offset the 1.15% drop in public sector deposits.

Investors’ sentiment remained depressed by falling oil prices, as the Doha Stock Market Index (DSMI) slipped by 1.96% q-o-q to 12,201.02 points end of June 2015. Trade during the second quarter of 2015 occurred at a higher volume of 758.04M shares worth $7.91B compared to 716.28M shares worth $8.30B during Q1, 2015.

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