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Tue 9 Jun 2015 12:29 PM

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Qatar expects budget deficit in 2016

Ministry of Development Planning and Statistics cuts 2015 GDP growth forecast

Qatar expects budget deficit in 2016
(Getty Images)

Qatar has cut its 2015 economic growth forecast to 7.3 percent from 7.7 percent and now expects its budget to swing to a deficit next year, as opposed to a surplus projected six months ago, the Ministry of Development Planning and Statistics said on Tuesday.

The forecast still implies a pick-up in real gross domestic product growth from 6.1 percent in 2014, the ministry said in an annual report.

"Real economic growth, despite lower oil prices, is expected to remain strong in 2015 on the back of vigour in the non-hydrocarbon economy that is set to carry through to 2016 and 2017, before it moderates," it said.

Consumer price inflation is expected to moderate to an average 2.0 percent in 2015, a significant reduction from the previous forecast of 3.5 percent. But that is partly because Qatar has reduced the weighting of housing and utilities in the price index this year.

The ministry expects Qatar's fiscal surplus to narrow considerably in 2015 to 1.4 percent of nominal GDP from 12.3 percent in 2014.

"In calendar 2016, it is foreseen that the overall fiscal balance will register its first deficit in 15 years, which the Qatar Economic Outlook estimates at about 4.9 percent of GDP, it said.

"This estimate assumes that: growth of current government spending continues to move on to a lower trajectory than in the recent past; there are effective cost reductions in the hydrocarbon sector; and additional non-oil and gas revenues accrue to the budget."

At the same time, Qatar expects its current account to remain in surplus throughout 2017.

Oil prices remain a key risk to the outlook, which is based on average prices of $56.0 and $61.6 per barrel in 2015 and 2016 respectively, the ministry said.

"Domestic risks touch mainly on the scale and complexity of Qatar's planned infrastructure project portfolio," it said.

"...If delays are experienced, efforts to bring implementation back on track might pull in more workers, adding to the population and accentuating inflationary pressures on front-line services already struggling to meet burgeoning demand."

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