Qatar’s Economy Posts Growth Despite Falling Oil Prices

For the first time, Qatar has deployed ground forces in Yemen, dispatching 1,000 troops to battle rebels in an oil-rich central province. This deployment marks a major escalation by the Saudi-led coalition that has been bombing the rebels from the air since March.

 Qatar’s Economy Posts Growth Despite Falling Oil Prices 
 Qatar’s Economy Posts Growth Despite Falling Oil Prices 

Concerning the World Cup, FIFA president Sepp Blatter had said that, out of economic interests, France and Germany applied political pressure to award the World Cup to Qatar.

Preparation to this important event was partly behind the 4.8% year-on-year (y-o-y) growth in Qatar’s real GDP in the second quarter (Q2) of 2015. GDP growth was driven by the non-hydrocarbon sector, where the Real Gross Value Added (GVA) of the non-mining and quarrying sector grew by 9.1%. This in turn was enhanced by double-digit rises seen mainly in construction, trading, hospitality and financial sectors. Qatar’s retail sector is expected to witness the opening of 12 new malls in the next 4 years, resulting in over 1.3M square meters of additional retail space by 2019. Meanwhile, real GVA of the mining and quarrying sector, with a 50.50% share of GDP, showed a 0.9% yearly rise.

Inflation stood at 1.5% y-o-y in Q3 2015, influenced by 2.1% and 2.5% price rises in “Housing, Water, Electricity & Gas” (21.89% weight) and “Transport” (14.59%). These increases were partly offset by the 3.6% drop in the “Recreation & Culture” sub-index. Inflation is expected to pick up after the recovery in international food prices in 2016 and higher oil prices in 2017.

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 June, 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 $108.8/barrel and $107.6/barrel end of September 2014 to $47.8/barrel and $47.0/barrel end of September 2015. Therefore, the “Mining” group, which represents 72.67% of the PPI plunged by 41.9%. The PPI “Manufacturing” subcomponent also showed yearly decline of 25.9%, while “Electricity and water” sub-index edged up by 0.4%.

As for Qatar’s trade balance, it tightened by 48.06% y-o-y to a surplus of $30.19B by end July 2015, as a result of decreasing exports and increasing imports. Declining oil prices drove down the largest component of total exports, hydrocarbons, by 37.53%, inflicting a 35.25% y-o-y plunge in exports to $48.45B by July 2015. On the other hand, imports augmented by 9.30% y-o-y to $18.26B, where motor cars and other passenger vehicles were the top imported commodities, going up by a yearly 19.69% to $1.66B.

On the fiscal front, Qatar’s fiscal deficit widened from $2.54B in Q1 2014 to $4.73B in Q1 2015, due to the elevated government spending and declining revenues. Total revenues narrowed significantly by 71.07% to $6.42B, as decreasing oil prices lowered hydrocarbon receipts. Government expenditures also dropped by 54.90% to $11.15B, by March 2015.

Looking at the monetary sector, total assets at commercial banks grew by 5.46% since end of 2014 to $286.11B, by August 2015. Private sector credit broadened by 15.14% to $109.73B, while that of the public sector slightly slipped by 0.45% since year start to $62.77B by August. Total deposits posted a 4% growth to $168.78B, due to the 6.45% and 52.76% increases in resident and non-resident private sector deposits that partly offset the 9.77% drop in public sector deposits.

Falling oil prices continued to weigh down on Qatar’s bourse, as the Doha Stock Market Index (DSMI) slid by 6.03% q/q to 11,465.22 points end of September 2015. Trade during the third quarter of 2015 occurred at a lower volume of 358.05M shares worth $4.25B, compared to 758.04M shares worth $7.91B during Q2, 2015. Worth mentioning, FTSE announced Qatar will be promoted from Frontier to Secondary Emerging, which will likely enhance liquidity and turnover in the market.

Leave a Reply

Your email address will not be published. Required fields are marked *