OVERHEATING ECONOMY THROUGH INVESTMENTS: IMF
Qatar's ongoing public investments could overheat the economy in near term, and the prospects of a further rise in US interest rates may “complicate” efforts to bolster real economic growth, which is expected to be 3.4% this year, according to the Interna
“Domestic risks are related to the ongoing public investment programme. While crucial for further economic development and diversification, it could bring about overheating in the near term, potential resource misallocation and reduced expenditure efficiency in the medium term,” the IMF said in its Article IV consultation with Qatar.
Although fiscal adjustment planned in 2017 by the authorities is moving in the right direction, the report said fiscal and external balances are “projected to persist in the near term,” though improvements are projected for the medium term, as hydrocarbon prices recover slightly and fiscal adjustment advances.
The pace and the composition of the adjustment should strike a balance between revenue increases and expenditure restraint in the medium term, it said.
Containing the wage bill, public service benefits, subsidies, and goods and services expenditure are some avenues to rein in public spending, while preserving growthpromoting public investment, according to the IMF.
“The prospects of further rises in the US interest rates may complicate efforts to bolster economic growth,” it said, adding that spillovers to the non-oil sector would be transmitted through slower government spending and declining liquidity in the banking system.