Qatar’s Real GDP Growth Accelerated to 6.5% in 2013 on Strong Investment and Higher Population


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Qatar’s Real GDP Growth Accelerated to 6.5% in 2013 on Strong Investment and Higher Population

  1. 1. Page 1 of 2 Economic Commentary QNB Economics April 5, 2014 Qatar’s Real GDP Growth Accelerated to 6.5% in 2013 on Strong Investment and Higher Population Qatar’s economy continued to maintain its strong growth momentum in the fourth quarter of 2013. Qatar’s real GDP expanded at a buoyant 5.6% (year-on-year) in the last three months of 2013, spurred by double-digit growth in construction, wholesale trade and hospitality, and financial, real estate, and business services, according to figures released by the Ministry of Development Planning and Statistics (MDPS). For 2013 as a whole, real GDP grew 6.5%, in line with QNB Group’s forecast (see Qatar Economic Insight report). QNB Group expects real GDP growth to accelerate to 6.8% in 2014 as the implementation of large infrastructure projects and higher population continue to drive double-digit growth in the non-hydrocarbon sector. Qatar Real GDP Growth (2012-2014) (Real GDP: % year-on-year growth; shares shown for sectors) 56.8 54.4 49.2 30 35 40 45 50 55 60 5.0 5.5 6.0 6.5 7.0 43.2 50.8 45.6 6.5 6.8 2013 2014f2012 6.2 Hydrocarbon (Left Axis) Real GDP (Right Axis) Non-hydrocarbon (Left Axis) Sources: MDPS and QNB Group analysis The growth figures for the fourth quarter of 2013 confirm the continued process of economic diversification of Qatar’s economy away from its traditional role as a hydrocarbon exporter toward a manufacturing and services hub. The oil and gas sector contracted by 1.1% year-on-year in Q4 2013, reflecting a fall in oil production, the temporary halt of a number of LNG trains for maintenance, as well as the moratorium on further exploration of the North Field. At the same time, wholesale trade, hotels and restaurants was the fastest growing sector (19.3% year-on-year), predominantly on the back of the double-digit increase in population. Financial, real estate, and business services was the second fastest growing sector (18.1% year-on-year) as banking intermediation accelerated and real estate services were boosted by the growing population. Construction activity expanded by 15.0% year-on-year as Qatar’s infrastructure investment program is gathering momentum. Furthermore, transportation and communication increased by 8.4% year-on- year primarily owing to increased passenger flows through Doha international airport. Looking forward, the acceleration in economic activity in the near-term is expected to be primarily driven by the implementation of additional large infrastructure projects in the non-hydrocarbon sector. The largest projects are mainly in the transport and real estate sectors. Qatar Rail is constructing the Doha metro network. The public works authority is modernizing a network of expressways (30 major projects), local roads and upgrading existing roads. Work is also being finalized on the new Hamad International Airport due to open later this year. At the same time, a
  2. 2. Page 2 of 2 Economic Commentary QNB Economics April 5, 2014 number of large private-sector real estate projects are under construction, the largest of which is Lusail, a waterfront development to the north of Doha, which will include commercial and residential districts. This large infrastructure investment program will have a direct effect on growth through higher investment spending and an indirect effect through population growth. A new wave of expatriate workers is coming into Qatar to respond to higher labor demand from infrastructure spending. This increased level of job growth should boost aggregate domestic consumption, which will be a key driving force of non-hydrocarbon GDP growth over the medium term. QNB Group expects population growth to reach 10.1% in 2014 and average 7.8% in 2015-16, adding to domestic demand. Overall, with strong growth, moderate inflation and high current account surpluses, Qatar’s economic momentum in the near term is expected to strengthen even further. Large- scale infrastructure spending, as highlighted by the newly released budget 2014/15, will drive the expansion in construction and transportation, while strong population growth leads to higher aggregate demand for housing, financial, retail and social services. Whilst the government has a key role to play in infrastructure development, other sectors are mostly going to benefit from private sector investments. For instance, small and medium- sized enterprises, such as hotels, medical services, retail and restaurants are expected to flourish in order to cater to the growing population. Contacts Joannes Mongardini Head of Economics Tel. (+974) 4453-4412 Rory Fyfe Senior Economist Tel. (+974) 4453-4643 Ehsan Khoman Economist Tel. (+974) 4453-4423 Hamda Al-Thani Economist Tel. (+974) 4453-4646 Ziad Daoud Economist Tel. (+974) 4453-4642 Disclaimer and Copyright Notice: QNB Group accepts no liability whatsoever for any direct or indirect losses arising from use of this report. Where an opinion is expressed, unless otherwise provided, it is that of the analyst or author only. Any investment decision should depend on the individual circumstances of the investor and be based on specifically engaged investment advice. The report is distributed on a complimentary basis. It may not be reproduced in whole or in part without permission from QNB Group.