Marios Maratheftis (left) and Charles Carlson. Kammutty VP
By Satish Kanady
DOHA: Qatar needs to deepen its domestic debt market as issuing government debt has significant benefits even for a fiscal surplus country like Qatar, a top global market researcher has said.
Attending a round table meeting yesterday, Marios Maratheftis, Global Head, Macro Research-Global Markets, Standard Chartered said government bond issuance is not happening in a big way in Qatar. “Being a highly surplus country, Qatar may be thinking it does not need to borrow. But issuing debt has significant benefits, even for fiscal surplus countries.”
It is key to help develop alternative source of funding and create strong market. Singapore is an example, he said.
Qatar’s planned infrastructure projects require significant long-term funding. Greater access to capital requires a more strategic approach to capital market development.
Standard Chartered forecasts that at least $34bn worth projects would be awarded in 2014 for key infrastructure projects. Private sector growth dynamics is expected to pick up significantly on the back of this.
Singapore is a country with lot of surplus, but it issues bonds to create markets. One of the reasons why Egypt survives despite all its problems is because of its deep debt market. Egypt is able to borrow in its own currency. “No country has done that in the GCC. Qatar has a great opportunity to deepen its debt market and can take the lead in the region’s access to long-term financing,” he said.
The bank expects Qatar’s external debt at year-end 2013 to be around $140bn. “We expect Qatar’s debt dynamics to strengthen over the next five years as its LNG sector has successfully positioned more of its exports to Asian markets, offsetting challenging market conditions in North America and Europe,” he said.
Marios said rent-induced inflation may be a key challenge for the economy in 2014. “Rents are likely to be a key driver and we expect them to begin rising next year,” he said. The entire GCC is going of be higher in inflation. In UAE, inflation is on the rise because of the housing market. In Qatar, inflation is on the rise, though moderately. “Housing rents are the key driver of inflation in Qatar. Food prices would not be a big issue any time soon. But we are not going to face the 2007-08 situation when the rents were going through the roofs”, he said.
On Standard Chartered’s energy outlook, he said energy prices will be stable for 2014. But Qatar has to keep diversifying its economy and keep take advantage of the windfall gains from the higher energy prices. “You cannot just rely on one driver of the economy. You cannot believe energy prices will keep running up forever. Historically energy prices have been running in cycles.”
Charles Carlson, CEO, Standard Chartered, Qatar noted the domestic economy is waiting for the infrastructure boom. “The sector is going to heat up quickly. We will see that either this year, or next year,” he said.