Qatar’s nominal GDP grew by 44% in 2008, its fastest rate of the multi-year boom the Gulf state has enjoyed, largely thanks to the sizable expansion of its gas sector, according to a new GCC Brief report from the National Bank of Kuwait.
Sustained government spending and strong measures to support the financial system could actually see the economy escape the current global crisis relatively unscathed, and deliver continued growth in 2009.
Despite concerns about over dependence on the hydrocarbon sector and high inflation (the report forecasts Qatar’s rate of inflation will top out at 10% this year), the prospects for continued growth in the national economy remain strong over the medium term.
Energy rules
Good news for the upstream energy industry continues to flow from Qatar, with the report suggesting gas and infrastructure spending will remain the primary areas of investment throughout the year. The added bonus for Qatar is that this continued spending is driving the non-oil economy along with it, allowing Qatar to outstrip its regional peers in 2009.
Recently release figures from the Qatar Central Bank indicate GDP grew at its fastest rate in 2008, rising to US$102 billion.
“The growth in the hydrocarbon sector outpaced other sectors in 2008, bucking a two-year trend of stronger non-hydrocarbon growth,” says the report’s principal author, Waji Boustany, assistant economist at National Bank of Kuwait. “The gas sector doubled in size in 2008, partly on higher energy prices, but also on the continued increase in output volumes.”
Although official statistics are not yet available, Boustany’s report cites industry estimates that Qatar increased gas production by 35-40% in 2008, as many large projects came online. Gas also overtook oil as the primary contributor to GDP with a share of 32%.
“There is growing consensus that Qatar will remain on track to record a big increase in real GDP – perhaps close to 9% – in 2009,” he says.
Hitches and risks
Certain areas of the Qatari economy remain a source of concern going forward. “The Qatari economy is dependant on gas and the hydrocarbon sector in general. The diversification efforts underway are in their infancy and rely on energy revenues to drive their development. Another impediment to this is the high cost of doing business in Qatar, primarily stoked by high inflation,” says Boustany.
Despite these concerns, and in view of what the rest of the world is enduring, the report concludes that the prospects for continued growth in the Qatari economy remain positive over the medium term.
