The Ministry of Development Planning and Statistics (MDPS) released today, 19 June 2016, the Qatar Economic Outlook 2016-2018. While the Outlook sees real gross domestic product (GDP) growth strengthening in 2016, it anticipates a contraction in nominal income and a decline in the fiscal and current account surpluses. In 2016 real growth of 3.9% is expected, driven by gathering expansion of the non-hydrocarbon economy and a boost from the start-up of the Barzan gas project. However, real GDP growth is set to taper in 2017 and 2018 as activity in the non-hydrocarbon sector starts to moderate and the added production from Barzan falls out of the equation. With oil prices forecast to remain low in 2016, a reduction of 2.9% in nominal GDP is projected for 2016. In 2017 and 2018 nominal GDP is foreseen to resume growth at 9.0% and 9.1% respectively.
Inflation in 2016 is forecast to moderately pick up in 2016 to 3.4% following rapid acceleration observed in January–April. The recent hikes to petrol prices in January of this year, as well as the removal of water and electricity subsidies in late 2015, will push up domestic prices. A slight pick-up in global commodity prices, and an anticipated softening of the U.S. dollar (to which the Qatari riyal is pegged) will push imported inflation up further in 2017and 2018.
Given significantly lower oil prices and an erosion of hydrocarbon revenues, a fiscal deficit is projected for calendar year 2016, for the first time in 15 years, at just under 8% of nominal GDP. However, if the recent oil price rally persists, investment income will be shielded and the fiscal deficit be lower than anticipated. Breakeven oil prices for the fiscal balance are estimated at $61.5 per barrel for 2016, and above $65 for both 2017 and 2018.
H.E. Dr. Saleh Al Nabit, Minister of MDPS, stated that “The fall in oil prices that began in June 2014 was not anticipated, and the rally that has been staged since January 2016 has been associated with considerable volatility. If they persist, lower oil prices will narrow the government’s fiscal cushion but our considerable financial reserves provide an ample buffer.”
Given lower oil prices, the Outlook expects the current account of the balance of payments to post a small deficit in 2016, but if average oil prices for the year rise by one US dollar, the current account will balance. Surpluses are anticipated to resume with the forecast rebound of oil prices in 2017 and 2018.
Dr. Saleh added that “Lower oil prices and the prospect of continued volatility serve to underline the importance of implementing the initiatives in Qatar’s National Development Strategy. These will help to diversify the economy and to shield it from the vagaries of oil price movements.”
The Qatar Economic Outlook 2016–2018 is available from HERE.
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