Qatar is set to run its first budget deficit in 15 years as it ploughs ahead with massive infrastructure spending ahead of the football World Cup in 2022.
It comes as a corruption scandal engulfs Fifa, the governing body of international football, attracting increased scrutiny of the decision to award the hosting of the tournament to Qatar in 2022 and Russia in 2018.
The Qatari government expects to run a fiscal deficit of 4.9 per cent of GDP next year, and 3.7 per cent of GDP the following year, according to Qatar’s ministry of development planning and statistics. The government earlier predicted a budget surplus of 4.7 per cent of GDP next year.
It has cut its growth forecast for this year to 7.3 per cent from 7.7 per cent – still above last year’s growth of 6.1 per cent – because of the short-term impact of the US$10.3 billion Barzan gas project on Qatar’s North East coast.
Doha insisted that it would continue to spend heavily on infrastructure over the next few years despite the budget deficit.
Qatar increased total spending by 18 per cent annually between 2004 and 2013, faster than any Arabian Gulf country, according to data from Deutsche Bank.
“Despite the oil price decline, Qatar will proceed with important capital spending plans,” said Saleh Al Nabit, minister of development planning and statistics.
Qatar has sizeable resources to weather the decline in commodities prices. It holds financial reserves equal to about 140 per cent of GDP, which should sustain the country for decades, given current spending estimates.
“Qatar’s high economic wealth levels and strong external and fiscal positions provide buffers to alleviate the impact of the sharp decline in the oil price,” said Trevor Cullinan, director of sovereign ratings at Standard and Poor’s (S&P).
In February, S&P reaffirmed Qatar’s AA credit rating as “stable”, citing its “high economic wealth and strong external and fiscal positions”.
The IMF said last year that Qatar’s capital investments ahead of the World Cup in 2022 were a major pillar of the country’s economic growth.
“We understand that the government is committed to awarding about US$220bn worth of large-scale investment projects over the next 10 years,” said Mr Cullinan. “We estimate spending explicitly related to the 2022 World Cup at around $10bn. We would expect the vast majority of the [overall investment] programme to go ahead.”
Despite Qatar’s budgetary position coming under pressure, it continues to spend at home and abroad.
The Qatar Investment Authority (QIA), the country’s sovereign wealth fund, on Tuesday agreed to pay HK$7.7 billion (Dh3.65bn) to buy a 16.53 per cent stake in HK Electric Investments (HKEI) from Power Assets, a utilities group controlled by billionaire Li Ka-shing.
Meanwhile, Cheung Kong Infrastructure, also controlled by Mr Li, has sold a 3.4 per cent stake in HKEI to QIA. With these transactions, QIA will have a 19.9 per cent stake in HKEI.
abouyamourn@thenational.ae
Follow The National's Business section on Twitter
