Qatar’s large infrastructure investment programme would be sustainable even if oil prices continued to drop considerably, according to a new report.
Prices of Brent crude oil have fallen from $115 per barrel in June to their current level of around $82, which has raised speculation about the impact that this will have on the major infrastructure spending plans of the GCC’s oil-exporting nations.
However, new research by Qatar National Bank suggests that oil prices “would have to fall considerably further to have any impact on infrastructure investment” in the country, it said.
Qatar is currently implementing a large infrastructure investment program in the run-up to the FIFA 2022 World Cup and its 2030 Vision.
Spending on infrastructure and industrial development to move its economy away from hydrocarbons recently led the government announcing a $182bn package of non-oil and gas investment over the next five years.
This includes the continued rollout of real estate projects like Lusail City, The Pearl-Qatar and Msheireb’s Downtown Doha, as well as spending on the new metro, roads, long distance railways and highways.
“These major projects are creating large numbers of jobs leading to high population growth,” it said, pointing to a 9.2% increase in population during the first ten months of 2014.
QNB pointed out that Qatar had a fiscal surplus of 15.6% in 2013 and a current account surplus of 30.9%. It estimates that oil prices would have to drop back to $67 per barrel for the country to begin running a budget deficit.
“Even if oil prices did fall below $67 per barrel, they would have to remain depressed for some time to have an impact on the investment programme,” it added.
“Qatar has the resources to draw on before being forced to make any significant cut backs to domestic investment. However, should oil prices remain low for a considerable time, a prioritisation process is likely to be implemented to ensure the completion of key projects.”
