An International Bank of Qatar brief on economic and financial developments in the country says performance was ‘impressive’ for a fourth consecutive year in 2006, despite constraints on resources.
The country is the top-performing economy in the region, and one of the richest countries in the world, with a per capita GDP of $63,000. The IBQ report, produced along with the economic research team at partner International Bank of Kuwait, predicts the economy could double again by 2012.
GDP expanded by 24% in 2006, having averaged 30% over the previous three years. Growth remained high, supported by gains in hydrocarbon output and ‘massive’ investment, and sustained momentum in the non-oil sector.
The report says the country is reaping the benefits of a development strategy set in the 1990s which combines economic openness with a clear economic diversification plan and institutional and democratic reforms. This along with favourable energy prices and high investment spending could see sustained levels of growth over the next five years.
Price pressures, however, continue to mount, with consumer inflation reaching 11%, driven by soaring rents, expansionary fiscal policy and resource constraints. High inflation is not expected to abate and could well become entrenched in the economy unless adjustments in the housing market stabilise rents, the study warns.
Government investment of $130bn to develop energy, infrastructure, industries, utilities and aviation is planned for the next five years. The government will encourage private sector investment, and aims to position the country as a hub for major sports and energy events.
Qatar boasts vast natural gas resources amounting to 15% of world reserves. It exported 25 million tons of LNG in 2006, making it the fourth largest exporter in the world.
Crude oil remains the backbone of the economy, comprising 60% of total export receipts. Oil and gas revenues reached over $20 billion over 2006, although this was tempered by slower growth in the second half of the year.
Net foreign assets held by the Qatar Central Bank reached $5.4 billion by the end of last year with surpluses in the current and fiscal accounts surpassing $30 billion and $10 billion respectively. The savings pool has been used to reduce the country’s reliance on energy revenues. The Qatar Investment Authority was launched two years ago in order to get better and more diversified returns including through international acquisitions, and unofficial estimates place the country’s foreign assets at $70 billion.
Regional politics remain challenging, with concerns about mounting tensions between Iran and the US/UN, the chaotic political situation in Iraq and the continued low-level threat of militancy across the region. Other risks include the possibility of a downturn in energy prices, and the boom/bust cycles in asset markets.
The correction in the Doha stock market in early 2006 took 23% off the value of the Qatari market in the space of two months, although the negative effect was not significant enough to reverse trends in private consumption, the study explains.
The stock market has recorded 8% growth so far this year, despite a weak start, and companies listed on the Doha Securities Market posted a 28% increase in earnings for the first quarter.
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