Positive news regarding Qatar continues to pour in. This time the news is related to country’s economy which has proven its resilience several times. QNB has revised up Qatar’s overall real Gross Domestic Product (GDP) to 2.8 percent for the current year from 2.5 percent previously.
The growth forecast has been revised up for three main reasons. First, QNB had recently raised its forecast for oil prices from $55 per barrel to $63 per barrel, which will lead to higher incomes and spending in the non-hydrocarbon sector. Second, it now expects a sharper rebound in hydrocarbon output as maintenance on LNG production facilities appears to have been dragged out in 2017, but should now be completed.
Third, the economic impact of the blockade has been less than expected and, therefore, it has reduced the expected drag from the blockade on 2018 GDP.
The underlying driver of the rally in oil prices in the second half of last year was a re-balancing in the global oil market. The global market, which had been oversupplied in 2016, switched to being under-supplied in 2017.
Supply was held back by Opec’s initial production cut to counter increases in US production. Additionally, oil demand was higher than expected on the back of strong global economic growth and as a response to lower prices.
Qatar’s GDP growth in the fourth quarter of 2017 was held back by the hydrocarbon sector. The latest data showed an unexpected drop of 6.4 percent in hydrocarbon production in the fourth quarter from the previous quarter. Given that crude oil production increased by 3.2 percent over this period, the drop in hydrocarbon GDP must be due to gas production, most likely as a consequence of temporary shutdowns for routine maintenance on LNG facilities.
The non-hydrocarbon sector grew 1.6 percent in the fourth quarter, or 6.6 percent annualised, with the finance, wholesale and retail trade, construction and real estate sectors contributing the most.
For the full year of 2017, overall real GDP growth was 1.6 percent with the non-hydrocarbon sector growing 4.2 percent and the hydrocarbon sector contracting 1.1 percent. Lower oil and gas output in 2017 was due to both lower crude oil production and maintenance on LNG facilities.
In the longer term, Qatar’s economy should benefit from a number of recent measures. Investment should be bolstered by new projects related to the expansion of LNG production and projects aimed at ensuring self-sufficiency and sustainability as well as an expected new law to allow 100 percent foreign ownership of new companies.
