DOHA: The pick up in Qatar’s infrastructure project is expected to narrow the country’s fiscal surplus from a record 14.2 percent of GDP in 2012-13 financial year to 9.0 percent in the current fiscal.
Qatar’s fiscal surplus during 2012-13 increased to a record $27.4bn according to the preliminary figures. This is more than double of last year’s surplus of $13.2bn and equivalent to 14.2 percent of GDP. The country has posted a surplus every year since 1999-2000. But with the investment activity picking up by an estimated 30 percent up during the first half of 2013, there will be a huge contraction in the fiscal surplus, a Q3 2013 economic update on Qatar released by NBK noted yesterday. While Qatar’s total revenues increased by 24.7 percent over the previous year to $76.3bn, total expenditures grew by only 2.0 percent to $48.9bn, significantly below the increase in spending recorded the year before and during the last five-years on average.
The analysts noted the contraction in development spending last year is likely a reflection of the delays experienced in rolling out key capital projects, a situation that should improve this year. The investment activity this year, as measured by the value of contracts awarded was up by 30.0 percent during the first half of 2013. It is likely to reach $56.5bn by year-end- double last year’s total. Given the imperatives of Qatar’s development plan and the 2022 World Cup, development spending is thereby by likely to increase from its low of 7.0 percent of GDP last year to 9.5 percent of GDP in 2013-14.
On the revenue side, the increase by 24.7 percent to a record $76.3bn was driven by burgeoning oil and gas revenues, which grew by 10.4 percent y-on-year. There is also a substantial increase in income from investments, like dividends from government-related entities;, and other sources like corporate taxes, customs duties etc, which grew by 62.3 percent year-on-year and 54.6 percent, respectively. However, given that real hydrocarbon output has likely peaked for the time being and upward movements in hydrocarbon prices are not expected, revenue growth will be increasingly dependent on income from non-hydrocarbon activities.
Earlier in the year, the report noted, Qatari authorities announced an expansionary budget for 2013-14 in which total spending was likely to increase by 18 percent on the previous year to $57.9bn and total revenues by 5.7 percent to $60.0bn. The government also forecast increasing its development spending by 20.6 percent. Having come under budget last year, spending growth, led by development spending on capital projects, is therefore likely to exceed budget estimates and outpace revenue growth resulting in the narrow downing of fiscal balance over the next two years.