Dubai: Qatar's economic growth will slow next year and it faces an increased risk of lower oil and gas prices due to weaker global demand, but the overall outlook for its economy is positive, the International Monetary Fund (IMF) reported yesterday.
The world's top liquefied natural gas exporter saw its economy expand at a double-digit clip in 2011 and it plans to spend heavily on infrastructure projects before it hosts the 2022 football World Cup.
"The economic outlook for 2012 remains positive, despite increased external risks. Real gross domestic product growth rate is projected to moderate to six per cent in 2012," the IMF said in a statement after concluding its annual consultation with Qatar on December 1. For this year, the IMF has estimated growth of 19 per cent.
Qatar's development planning authority said in October it expected real GDP growth to slow to 5.1 per cent in 2012 from a projected 15 per cent for this year, as a decades-long gas expansion programme winds down.
Infrastructure growth
"While real hydrocarbon GDP will slow down to less than three per cent due to the country's self imposed moratorium on development of new hydrocarbon projects until 2015, large infrastructure investment and increased production in the manufacturing sector will boost growth in real non-hydrocarbon GDP, which will accelerate to nine per cent," the IMF said.
Qatar's outlook remains positive over the medium term, the IMF said, but warned of external risks.
"The principal risks ahead are lower oil and gas prices as a result of a decline in global demand, disruption in transportation of LNG due to increased geopolitical tensions, but the government has adequate financial cushions and a policy framework in place that would mitigate potential risks."
The fund slightly reduced its estimate of Qatar's inflation compared to projections in its Regional Economic Outlook, released in October.
"Following an average deflation of around 2.5 per cent in 2010, inflation is expected to average at 2.0 per cent in 2011, with the negative rental inflation being more than offset by increases in domestic prices of petrol, and the impact of global food prices," the IMF said.
"Average headline CPI inflation is projected at four per cent in 2012."
In its October forecasts, the IMF had predicted average inflation of 2.3 per cent in 2011 and 4.1 per cent next year.
Qatar said in September it would hand out salary, pension and benefit increases to state and military employees costing as much as $8.2 billion (Dh30.1 billion), following social unrest elsewhere in the Middle East and North Africa.
"Headline inflation remains subdued, but inflation risks have risen somewhat due to a permanent increase in public sector wages, which underscores the need for fiscal policy to monitor aggregate demand and the central bank to manage liquidity," the fund said.
Increased expenditure
The IMF said the salary and pension hikes would add an estimated $1.6 billion to government expenditure in the budget for the 2011/12 fiscal year.
"Closing regulatory gaps in the financial system and continuing with efforts to develop the domestic bond market are needed to further strengthen financial stability while developing the financial system," the IMF added.
