QNB Report: Qatar Well-Positioned to Continue Economic Diversification

Doha, March 03 (QNA) - Qatar's real GDP growth is expected to accelerate to 7 percent in 2015, 7.5 percent in 2016 and 7.9 percent in 2017 as the government continues to invest heavily in the non-hydrocarbon sector despite lower oil prices, QNB concluded in its Qatar Economic Insight 2015. The report examines recent developments and the outlook for the Qatari economy as it continues its strong growth based on large investment spending. The Barzan project is expected to drive growth in the hydrocarbon sector, which is expected to grow by 0.8 percent in 2015, 1.8 percent in 2016 and 1.9 percent in 2017 despite declining oil production due to maturing oil fields. The non-hydrocarbon sector is also projected to continue its double-digit growth on large investments in construction, financial services and real estate. The large influx of expatriate workers driven by major investment projects will add to aggregate demand, putting moderate pressure on domestic inflation. Counterbalancing this, the report said, foreign inflation is expected to slow in 2015-17 as international commodity prices fall on weak global demand, record food harvests and a stronger U.S. dollar. The report projected overall inflation to slow to 2.5 percent in 2015 as rising rents (with a lower weight in the basket) are expected to be partly offset by lower international food prices, before accelerating to 3.2 percent in 2016 and 3.3 percent in 2017. Lower hydrocarbon revenue and rising capital spending are expected to tip the fiscal balance into deficits of 2.2 percent of GDP in 2015, 3.4 percent in 2016 and 3.7 percent in 2017. Hydrocarbon revenue is expected to decline with lower oil prices and crude oil production, but this will be partly offset by higher non-hydrocarbon revenue, supported by better corporate tax collection. The government is expected to increase its capital spending while stabilizing current expenditure with further expenditure rationalization. The government plans to change its fiscal year to a calendar year basis starting with the 2016 budget, with an interim extension of the 2014-15 budget by nine months to cover the remainder of 2015. Bank lending is expected to rise by 9 percent in 2015, 10 percent in 2016 and 11 percent in 2017 increasingly driven by project lending and the expanding population. Deposits are projected to grow steadily by 11.3 percent in 2015, 11.5 percent in 2016 and 12.5 percent in 2017 on strong population growth and higher non-hydrocarbon GDP, according to the report. The outlook for banking is positive with low provisioning requirements and efficient cost bases will support strong bank profitability, the report concluded. (QNA)