DUBAI

The Pak Banker - - BUSINESS -

The de­te­ri­o­ra­tion in Qatar's fis­cal po­si­tion in fi­nan­cial year 2014- 15 (April-March) on the back of the lower hy­dro­car­bon prices was lim­ited by a con­trac­tion in gov­ern­ment spend­ing, but the coun­try is ex­pected to see a sharp nar­row­ing in the sur­plus and face a deficit in 2016 ac­cord­ing to fore­casts by Abu Dhabi Com­mer­cial Bank (ADCB).

The gov­ern­ment had an­nounced an in­terim bud­get for April to De­cem­ber 2015 as it moves to a cal­en­dar year for public fi­nances (start­ing Jan­uary 1, 2016) from a fis­cal year (April-March). The 2014-15 bud­get has been ex­tended by nine months (April-De­cem­ber 2015). The ex­tended bud­get as­sumes an oil price of $65 per bar­rel, un­changed from the 2014-15 bud­get.

"Rev­enues from the in­terim ninemonth bud­get are es­ti­mated at QAR169.3 bil­lion, while ex­pen­di­ture has been slated at QAR163.8 bil­lion, trans­lat­ing into an es­ti­mated bud­get sur­plus of QAR5.5 bil­lion. We con­sider the bud­get's oil price as­sump­tion to be slightly op­ti­mistic for the ninemonth pe­riod," said Mon­ica Ma­lik, Chief Economist of ADCB.

Ac­cord­ing to fore­casts by ADCB econ­o­mists, Qatar's eco­nomic out­look re­mains strong, de­spite energy prices be­ing sig­nif­i­cantly lower. They ex­pect real gross do­mes­tic prod­uct (GDP) growth to ac­cel­er­ate to 5.1 per cent in 2015 and 5.9 per cent in 2016, with gas out­put to in­crease mod­er­ately. The real non-hy­dro­car­bon GDP is ex­pected to re­main ro­bust in 2015 and 2016 as progress is made on in­vest­ment pro­gramme.

De­spite strong GDP out­look, the coun­try faces medium-term risks on both the ex­ter­nal and do­mes­tic fronts. Ex­ter­nally, it has lim­ited po­ten­tial for gas rev­enues to rise, with pro­duc­tion flat from 2018 and fur­ther down­side risks to the price on the back of ris­ing global sup­ply.

While hy­dro­car­bon out­put growth in nom­i­nal terms is ex­pected to con­tract sharply on the back of the sub­stan­tially lower energy prices, the coun­try is ex­pected to face rel­a­tively weaker con­trac­tion in nom­i­nal GDP com­pared to the other GCC coun­tries due to Qatar's long-term gas agree­ments.

De­spite sharp fall in oil prices, the value of projects awarded in Qatar was solid in the first half of 2015 although

the lower com­pared to the same pe­riod last year. "We ex­pect the cur­rent fo­cus on es­sen­tial in­fra­struc­ture (such as trans­porta­tion, real es­tate, and lo­gis­tics) to re­duce sup­ply con­straints and bot­tle­necks be­fore con­struc­tion re­lated di­rectly to the FIFA 2022 World Cup be­gins in earnest. We forecast in­vest­ment and con­struc­tion ac­tiv­ity to peak in 2017-2020, likely re­sult­ing in stronger real non-hy­dro­car­bon GDP growth," said Ma­lik

An­a­lysts have warned of risks re­lated to in­fra­struc­ture over­ca­pac­ity, as well as low in­vest­ment re­turns, fol­low­ing the World Cup. How­ever, some mea­sures have al­ready been taken to re­duce over­ca­pac­ity risks, in­clud­ing re­duc­ing the num­ber of sta­di­ums and con­sid­er­ing more flex­i­ble ac­com­mo­da­tion op­tions.

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