Qatar to maintain buoyant growth rates on infrastructure drive, QNV 2030 goals |
Gulf Times - 12 January, 2017
Qatar will maintain its buoyant growth rates supported by ongoing construction of significant infrastructure projects in preparation for the FIFA World Cup 2022, and in order to meet the country’s National Vision 2030, an S&P report has said.
“We expect the national development strategy projects to improve the economy’s productive capacity,” S&P said in its report ‘Middle East and North Africa Sovereign Rating Trends 2017’.
Generally on the Gulf Cooperation Council countries, S&P said, GDP growth would “remain weak” this year, reflecting the impact of low oil prices and the resulting fiscal consolidation and reduced banking sector liquidity.
S&P said it expects average GCC GDP growth to slow to about 2% in 2016, compared with closer to 4% in 2015 and to remain around these relatively weak growth rates in 2017.
Governments across the region implemented expenditure cuts and subsidy reforms, which have weakened both corporate and household activity, while reduced hydrocarbon-driven deposits in regional banking systems and government domestic borrowing have increased interbank rates and squeezed banking sector liquidity, it said.
Economic activity in the oil and gas sector was weak across most of the GCC. In the absence of a sharp increase in oil prices, S&P expects further weakness in the hydrocarbons sector over 2017.
This follows the agreement by members of the Organisation of Petroleum Exporting Countries (Opec) to cut production by 1.2mn bpd in concert with a reduction of 558,000 bpd by non-Opec members.
Notwithstanding this broad expectation for 2017, S&P notes that recently released third quarter 2016 GDP data for Qatar and Saudi Arabia shows accelerating hydrocarbon sector growth, related to slightly higher oil prices and increased production prior to the upcoming production cuts.
Non-hydrocarbon growth has also slowed in most GCC countries and S&P expects further fiscal consolidation measures by individual governments to curtail household and corporate spending in 2017.
Non-hydrocarbon output slowed sharply in Abu Dhabi in 2016 compared with the previous year due to weak non-financial corporation and declining public sector activity.
S&P expects overall economic growth of 2% in 2017, as in the previous year.
In Bahrain, the non-hydrocarbon sector is holding up relatively well due to the dynamic education and health sectors, and is also supported by the implementation of major infrastructure projects.
The same is broadly true for Qatar where non-hydrocarbon sector activity has slowed to closer to 5% in 2016 from above 8% in 2015.
S&P also expects economic activity in Saudi Arabia to accelerate to 2% this year, compared with 1.2% in 2016. During 2016 economic growth slowed to 1.3% on average over the first three quarters.
The “weakness in the non-hydrocarbon sector was apparent” particularly in government services and the construction sector.
However, S&P says that the government has started paying off its arrears to the construction industry and this could “provide a boost” to contractors and related project activity in 2017.
The “delayed payments” highlight the dilemma for GCC governments, which are trying to consolidate their large central government fiscal deficits, while at the same time attempting to support economic growth.
“The long-term sustainability of GCC economic growth and the ability of these economies to absorb future increases in their working populations and diversify government revenues away from the hydrocarbons sector will rely on the prospects for growth in the non-hydrocarbon sector.”
In S&P view, “significant challenges remain in this regard and meaningful diversification will not happen in the short term.”
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