Qatar economic activity soaring

By Pratap John

Chief Business Reporter

Large infrastructure projects such as the Doha Metro Rail would accelerate Qatar’s economic activity until the year-end, says QNB, which sees an increasing role for the country’s non-hydrocarbon sector until 2015.

The large infrastructure investment programme will have a direct effect on growth through higher investment spending and an indirect effect through population growth, a QNB report yesterday said.

Many expatriate workers are coming into Qatar to respond to higher labour demand from infrastructure spending. As a result, QNB expects Qatar’s population to grow rapidly over the next two years.

“This increased level of job growth, and thus higher disposable incomes, should boost aggregate domestic consumption, which will be a key driving force of GDP growth in the medium term,” the report said.

While the rapid expansion of Qatar’s economy does not seem to be running into any major supply-side bottlenecks, the rapidly expanding population is indeed putting some strain on the country’s infrastructure networks. With Qatar’s population more than tripling in the last 12 years, there has been a parallel increase in the number of vehicles on the roads (876,039 vehicles in 2012, compared with 287,500 in 2000).

However, large infrastructure projects are being rolled out, such as, the new Doha Port and the new Hamad International Airport, which will greatly ease some of the infrastructure constraints facing the transportation system.

Furthermore, consumer price index (CPI) inflation has stabilised at a moderate level (3.1%) in August 2013. Rents, which are nearly a third of the CPI, are rising but the rate of rental increases has been slowing in recent months while non-rent inflation has fallen. The latest CPI inflation data is in line with QNB Group’s forecast for 3.6% inflation in 2013 as a whole, increasing slightly to 3.8% in 2014.

Looking ahead, with strong growth, stable inflation and high current account surpluses, Qatar’s economic momentum for the second half of 2013 and throughout 2014 is expected to strengthen.

Large-scale infrastructure spending, as part of the build-up towards the 2022 World Cup in Qatar, will drive the expansion in construction and transportation, while strong population growth leads to higher aggregate demand for housing, financial and social services.

Qatar’s economy continued to maintain its strong growth momentum in the second quarter of 2013, QNB said.

Qatar’s real GDP expanded at a robust 6% pace (year-on-year), spurred by double-digit growth in construction, transport and communication, and financial, real estate, and business services.

The economy expanded at a similar pace in Q1, 2013, according to revised figures.

QNB expects real GDP growth to accelerate during the second half of the year (reaching 6.5% for the full year) and into 2014 (6.8%), as the implementation of large infrastructure projects accelerates and higher population boosts aggregate demand.

The oil and gas sector only expanded by 1% year-on-year in Q2 2013, reflecting the moratorium on further exploration of the North Field.

On the other hand, financial, real estate, and business services was the fastest growing sector (15.4% year-on-year), as banking intermediation accelerated and real estate services were boosted by the growing population.