By Andy Sambidge
New report says 2022 preparations already influencing economic developments
Qatar is poised to spend $130bn on infrastructure projects ahead of hosting the FIFA World Cup tournament in 2022, according to a new report by KFH-Research.
The report said the government plans to invest $35bn to build a rail and metro line, a seaport ($7bn), new roads and stadiums and a slew of hotels and housing projects to upgrade the country's infrastructure ahead of the event.
"The magnitude of the preparations is already influencing economic developments, alongside additional projects included in the current National Development Strategy," KFH-Research said.
"Although the government will be the main source of funding, much of the work, entrusted to contractors, including foreign companies, will require additional financing from domestic banks, as the government has insisted that Qatari firms be involved in all World Cup-related projects," it added.
The report on the Qatari economy said it expected total GDP growth to slow down in 2012 compared to the registered rate last year, due to an increase in overseas risks.
It noted that Qatar's real GDP moderated to five percent in Q2 from 6.9 percent in the previous quarter as growth in the construction industry eased.
Qatar's construction sector growth declined to 10 percent from 13.9 percent in the same period, the study said.
"Although the construction industry is showing a moderating trend, the growth rate is still a resilient double digit number," the report added.
KFH-Research said during the first four months of 2012, loans to the corporate sector were 80.4 percent higher than a year earlier, while personal credit grew by 14.1 percent.
It added that lending was particularly strong to the real estate sector.
The International Monetary Fund has noted that local banks plan to raise as much as $20bn through international bonds and Euro medium-term notes in the near term.
"Qatar's strong credit rating should help banks to access such funding. However, the rapid credit growth and greater reliance on foreign funding comes with potential risks. The IMF has cautioned the Qatar Central Bank to monitor closely the quality of domestic loans, especially in the real estate sector in view of the current excess supply of real estate and the uncertain global economic outlook," the report added.
Meanwhile, growth in the mining and quarrying sector which includes oil and gas industry moderated to 0.8 percent in Q2 from 4.6 percent in Q1 due to softer global oil prices.
"We believe the shortfall in Qatar's gas price is just momentary and Qatar's LNG industry will continue to fare well in the coming years underpinned by strong gas production," the report said.
Qatar is the world's largest LNG producer, with a capacity of around 79.0 million tonnes per year of LNG from its two giant plants, Qatargas and RasGas.
KFH-Research said it continues to expect a robust growth for Qatar in 2012 of eight percent, as LNG exports-driven growth will remain, while the focus shifts to domestic demand activities.
This is a shameful and wasteful amount of money to spend on what is effectively an ego trip.
I wonder how many companies could be made with this much money!! This region is desperate for jobs.