The recovery of Qatar’s hydrocarbon sector in the second half of this year will contribute to the country’s total GDP growth, according to a reported done by BMI Research.
“Hydrocarbon production returning to growth and continuous investment in infrastructure projects will support Qatar’s economic growth,” the Fitch Group company said noting that the country would continue to outperform its Gulf peers.
According to BMI, Qatar’s hydrocarbon GDP contracted by 2.1% in the first half of 2016 amid falling oil production, but this decline is not expected to continue forecasting that hydrocarbons production will stay flat in 2016 and will grow by 1.8% in 2017.
“The oil price rebound since the start of the year will support consumer and business confidence over the coming quarters,” BMI said. Brent prices have rallied more than 70% since the $29-per-barrel-low reached in January 2016, trading at an average of $51.6 in October 2016.
Given Qatar’s dependence on hydrocarbons, the environment of low oil prices has forced the government to undertake fiscal consolidation. “With our team forecasting Brent prices to average $55/b in 2017, up from $45.5/b in 2016, we believe that the worst is now past for the Qatari economy,” BMI Research said.
Nonetheless, BMI cautions that the recovery will be slower than previously anticipated.
The authorities concerned have slowed down investment in secondary infrastructure projects and reduced current spending since the start of the year. Leading indicators are also pointing to a significant fall in confidence. Dun & Bradstreet’s business optimism indices for Q2, 2016 – the latest readings available – for the hydrocarbon and non-hydrocarbon sectors came at their lowest levels since Q2, 2009.
BMI Research also said “the slowdown in economic activity in Qatar will be more important than previously anticipated, with latest GDP figures pointing to a continuous slowdown in non-oil activity.” Hydrocarbon activity (accounting for more than 50% of GDP) remained in contraction, declining by 1.2% year on year, but showed some improvements compared with Q1, 2016.
