Qatari Oil, Gas To Have Limited Impact On GDP Growth

Qatar’s gas and oil will have less impact on the economic growth in the near future, and the government will keep inflation in check by streamlining large construction projects, top officials said on Tuesday.

Qatar’s economy had averaged 16 per cent annual growth in 2006-2011 as the tiny Gulf Arab country boosted its liquefied natural gas exports. It slowed to 6.2 per cent last year as gas expansion levelled off, close to a government forecast of 6.2 per cent. The forecast for this year was 4.8 per cent.

“We expect the oil and gas sector to have a limited growth impact on the country’s GDP (gross domestic product) in the foreseeable future,” Prime Minister Sheikh Abdullah bin Nasser al-Thani told a financial conference in the Qatari capital.

The government imposed a moratorium in 2005 on all new gas export projects from the massive North Field and indicated in late 2010 that it does not plan to lift the moratorium in 2014, when it had originally been expected to be reviewed.

The International Monetary Fund forecast in November Qatar’s oil GDP, adjusted for inflation, would grow just 0.4 per cent in 2013 and decline by 1.1 per cent next year after a 1.7 per cent rise in 2012. It expects the overall economic growth to slow to 5.1 per cent this year and 5.0 per cent in 2014.

The oil and gas sector accounted for 58 per cent of Qatar’s economy and 59 per cent of exports in 2012. Hydrocarbon receipts represent some 70 per cent of the government budget income.

Qatar plans to spend about $140 billion on infrastructure projects before it hosts the 2022 World Cup soccer tournament, including a new airport, stadiums, roads and rail.

Finance Minister Ali Sherif al-Emadi told the same event that the policymakers planned to avoid pressure on prices and public services that could come from the construction activity.

“The process of developing financial policy will focus on supporting these projects in the means of setting priorities,” he said in his first remarks since being appointed in June. “And utilizing resources effectively, establishing a balance between costs and production, coordination between projects to avoid pressure on public services and to control inflation.”

Qatar’s fiscal spending has risen an average 26 per cent annually in the past decade as the country expanded gas producing facilities and infrastructure. But its ability to fight inflationary pressure with monetary policy is constrained by the riyal currency’s peg to the U.S. dollar.

The IMF’s projections show inflation should roughly double to 3.7 per cent on average this year and 4.0 per cent in 2014 from 1.9 per cent in the previous two years. That is still well below the record 15 per cent in 2008.

Emadi’s comments echoed November remarks of Sheikh Tamim bin Hamad al-Thani, who became emir in June when his father handed over power. He said the country will use all available tools to contain inflation while cracking down on corruption and business monopolies.