Qatar deals siege impact with consummate ease

 02 Nov 2017 - 1:02

By Satish Kanady / The Peninsula

The blockade-induced ‘surprise’ on Qatari economy is easing and market fundamentals are on a recovery mode, and back to pre-dispute levels. The government’s capital injections have offset more than the withdrawal of $12bn in foreign cash from the banking system since May, resulting a phenomenal 18 percent YoY deposit surge in September, according to NBK’s Qatar Chartbook.
Releasing MENAP’s (Middle East, North Africa, Afghanistan and Pakistan) regional economic outlook in Dubai the other day, IMF also noted the Qatari economy and financial markets were fast adjusting to the impact of the regional diplomatic rift.
According to NBK analysts, Qatar’s goods imports have recovered back towards pre-dispute levels, after plunging 40 percent YoY in June. Crude output dropped to 0.57 mb/d in September in compliance with Opec production cut targets of 127 percent. Brent crude has risen from its June low of $45; rising global supplies are keeping natural gas prices subdued. Population growth reached a 6-year low of 1.9 percent in August, though was slowing well before the GCC dispute began.
“The overall imports container volumes to Hamad port by end of this year is expected to be between 440,000 - 450,000 TEUS , which will be the highest yearly import container volume ever . The full container exports out of Qatar is mainly from industrial ports located within Mesaieed industrial city and are contributing an estimated 200,000 TEUS of exports an year”, Cherish Kurien, a top executive with a leading container shipping line, told The Peninsula yesterday .
Qatar’s fiscal deficit narrowed to 5 percent of GDP in the first quarter of this year- better than a year earlier – as revenues rose on higher oil prices. Inflation has slipped into negative territory since August, reflecting further falls in housing rents; food prices, however, have been pushed higher, NBK analysts said.
No fresh external debt has been issued so far in 2017. A recent accounting change added $19bn to recorded FX reserves, but they are still down sharply since May.
Real estate prices have seen renewed declines, falling 9 percent between June and September. Project activity slowed sharply in 2016 and could ease further this year, particularly in the construction sector.
Growth in broad money has surged thanks to a sharp rise in government deposits. Credit growth has held up reasonably well at 13 percent YoY, despite continued softness in private sector borrowing. Growth in deposits has recently surged on the back of injections of government funds, which have offset large non-resident outflows… This in turn has pushed the public sector’s share of overall deposits to 38 percent.
According to the analysts, tighter liquidity and higher policy rates have pushed up interbank rates in recent months. The QCB raised its key deposit rate to 1.5 percent in June, following the lead of the US Fed.
Further hikes are seen in 2017/18. CDS rates have eased back from their June/July highs, but concerns remain over diplomatic tensions.
“Interest rates have risen partly due to hikes in official policy rates; speculation on the currency peg has receded after spiking in June, but the offshore spot market has been volatile”, NBK Chartbook noted.