Qatar halves GDP forecast for 2015 amid oil plunge

Oil prices remain a serious risk to the outlook for Qatar’s economy. Pictured, Doha. AFP

Qatar said it had halved its forecasts for economic growth in 2015.

Growth expectations were slashed to 3.7 per cent from the 7.3 per cent forecast in June. But the government’s biannual outlook said the country would record a fiscal surplus this year of 1.7 per cent of GDP, a figure above the 1.4 per cent it projected in June.

“On the fiscal side, the government is taking measures to rationalise expenditure. Still, markedly lower hydrocarbon revenue will narrow the surplus this year and is expected to lead to a modest deficit next year of about 4.8 per cent of GDP,” the Development Planning and Statistics Minister, Saleh Al Nabiy, said in a ministry report.

He said a continued mismatch in oil market supply and demand could prompt a larger adjustment in government spending plans, but an anticipated pick-up in oil prices and continued spending restraint could make Qatar’s deficit begin to retreat in 2017.

Qatar’s upcoming budget is being scrutinised for the impact lower hydrocarbon prices will have on state spending as the country prepares for the 2022 Fifa World Cup.

It will also be Qatar’s first new budget in almost two years, after it shifted its fiscal year to December 31 from March 31 earlier this year.

Oil prices remain a serious risk to the outlook for Qatar’s economy.

The ministry based its forecasts on oil priced per barrel at US$52.40 this year, $51.20 next year and $55.30 in 2017, according to the report. This is down, respectively, from $56, $61.60 and $65.60 used in the June report.

“The explanation for the slower [2015] GDP growth lies entirely in the performance of the oil and gas sector,” the ministry report said, adding that crude oil output this year was expected to be about 6 per cent below last year’s levels.

Real GDP growth is expected to increase to 4.3 per cent next year before tapering to 3.9 per cent in 2017, as benefits from increased gas and condensate production are offset by a slowdown in construction and the inflow of migrant workers as infrastructure spending peaks.

The chances of divergent monetary policies further complicate the outlook, the ministry said, noting the impending rise in interest rates in the United States for the first time in almost a decade.

Qatar pegs its currency to the US dollar, which should mean it mirrors American rate decisions.

However, Qatar’s central bank governor said in October that he saw no reason to imitate any US rate hike because of positive liquidity conditions in the Qatari banking system.

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