Qatar's 2023-24 outlook 'favourable' on elevated global gas prices: Allianz Trade

Qatar's outlook for 2023-2024 is favourable, thanks to continued elevated global gas prices, Allianz Trade said and noted the country’s economy strengthened on the back of high global natural gas prices.In its latest country update, Allianz Trade forecasts around 3% growth for Qatar over the next two years. After a slow start, Qatar’s "recovery from the double shock of the global Covid-19 crisis and the drop in oil and gas prices in 2020 has been sound.”Real GDP contracted by -3.6% in 2020, less than the GCC average of -4.9%, thanks to a more diversified economy and lower dependence on oil revenues – Qatar’s main export product is natural and manufactured gas.A moderate recovery in 2021 resulted in real GDP growth of 1.6%. The recovery gained strong momentum in 2022, mainly thanks to the sharp rise in global gas prices, Allianz Trade noted.Moreover, a high Covid-19 vaccination rate allowed for the successive removal of lockdown measures and supported consumer spending.FIFA World Cup Qatar 2022 also supported economic growth through increased tourism revenues. Real GDP grew by an average 4.4% in the first three quarters of 2022 and Allianz Trade estimates it to have accelerated towards the end of the year.Qatar’s fiscal reserves are solid but an elevated public debt level requires monitoring, Allianz Trade noted. Qatar’s fiscal breakeven point has ranged between $35 and $55 per barrel of crude oil over the past decade.Hence the government has recorded large annual fiscal surpluses in most years, except for 2016-2017 when oil and gas prices had been persistently low for some time."Even in 2020 a small surplus of 1.3% of GDP was achieved. The surplus widened to around 4.4% in 2021 and we estimate it to have increased to more than 10% in 2022, thanks to surging gas prices. We project continued robust surpluses close to 10% of GDP in 2023-2024,” Allianz Trade noted.Meanwhile, the country’s public debt rose from 25% of GDP in 2014 to 73% in 2020, in part due to declining nominal GDP. However, the debt-to-GDP ratio eventually declined to 58% in 2021 and Allianz Trade expects it to fall further over 2022-2024 in the wake of the economic recovery.Allianz Trade forecasts the ratio to remain elevated and it should be monitored closely. Overall, however, Qatar will remain a large net external creditor, thanks to the huge foreign-asset position in the Qatar Investment Authority (QIA, a sovereign wealth fund currently estimated at approximately $475bn)."External liquidity will remain unproblematic in the next two years. Qatar has recorded large, sometimes huge annual current account surpluses for more than two decades, with the exceptions of 2016 and 2020 when global oil and gas prices were particularly low,” Allianz Trade noted.These surpluses, it said, have contributed to the build-up of the QIA. Higher oil and gas prices moved the current account back into a surplus of nearly 15% of GDP in 2021 and more than 20% in 2022. That ratio is likely to narrow somewhat in 2023-2024 but should remain well in the double digits.External debt is relatively high; it rose to 126% of GDP in 2020, incurred by oil and gas investments since the 2000s, but repayment obligations are unlikely to present liquidity problems. Meanwhile, the ratio is estimated to have fallen to approximately 84% in 2022 and should decline further.The annual debt-service-to-export-earnings ratio is forecast at a manageable 16% or so in 2023. Qatar’s "financial resources will remain strong.”The combined FX reserves of Qatar Central Bank and the QIA represent over 200% of annual GDP and cover more than 80 months of imports, Allianz Trade noted.