Corporate deposits with commercial banks have plunged more than 12% in the first four months of this year, putting the project finance sector in the country in a quandary, according to Qatar Economic Outlook (QEO) 2012-13.

The growth of commercial banks’ deposits continued on a downward trend in the early months of 2012 and total deposits dipped by 0.4% in April compared with a year ago, said the General Secretariat for Development Planning in its QEO, released on Monday.

“The main culprit for the decline was corporate deposits, which retreated by 12.3%,” it said. However, it did not specify the reason for the precipitous fall.

Frank Harrigan, director of the General Secretariat for Development Planning’s Economic Development department, said the reliance of commercial banks on wholesale funds has been “potentially problematic”; making project finance difficult.

His views assume significance considering that the pipeline of investments in Qatar during 2012-18 has been estimated at about $ 130bn in 2012 prices.

The government budget for financial year 2012/13 foresees a 28% increase in outlays compared with budget spending estimates for the previous financial year, though the increase is “likely to be somewhat smaller set against realised expenditures.”

The programmed spending on major capital projects is to account for about 25% of total expenditure, rising by more than 30% against actual outlays in financial year 2011/12, GSDP said, adding sizeable increases in health and education expenditure are also planned.

The potential legacy impacts of Qatar’s investment programme include improvements in institutional and human capabilities and systems and a strengthened private sector, it said, adding “these opportunities need to be consciously identified and leveraged.”

In the case of personal deposits, QEO said it stayed healthy, rising by 15.4%.
On the credit side, the report said it continued to accelerate in the earlier months of this year, expanding by 35.3% year-to-date in April.

“Credit to the personal sector climbed by 14.1% and that to the corporate sector by 80.4%,” it added.

The broad money supply increased by 12.1% year-on-year (y-o-y) in March-end, it said.
The report observed that after an anemic growth in 2010, credit to the private sector expanded by 19.2% y-o-y in 2011.

Terming that the acceleration was broad-based, it said credit to contractors and the real estate sector climbed rapidly by 33.1%.

Consumer spending, which had dipped in 2010, rebounded, growing by 19.8%; while credit to industry continued to shrink for most of the year, although it managed marginal growth of 1.1% by year-end.

Credit to the public sector (which includes the government, governmental institutions and semi-government bodies) shot up 44.7% y-o-y in 2011 with much of this investment linked to hydrocarbon projects that moved towards completion as 2011 came to a close.