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Qatar - Top performer across GCC economies

Tuesday, 31 August 2010 10:01

By all recent indicators, Qatar is leading the way among GCC economies, with a major bank forecasting that the country will be the top performer across the Gulf over the next two years, buoyed by large liquefied natural gas (LNG) projects, as well as residential and retail real estate developments.

According to the “Global Economic Weekly Report”, issued in late July by the Bank of America Merrill Lynch, Qatar’s GDP is set to grow 11.3% in 2010 and 9.6% in 2011. Estimates for the GCC as a whole are lower, at 3.6% and 4.2%, respectively. The country is expected to show a surplus of 8% of its GDP in 2010 and 9% in 2011, compared to a Gulf average of 7.3% and 10%. Individual country estimates for GDP growth for 2010 and 2011 came in, respectively, at 3.2% and 3.9% for Saudi Arabia, 1% and 2% for the UAE, 2.5% and 3.1% for Kuwait, 4.6% and 4.8% for Oman, and 2.4% and 2.8% for Bahrain.

In an effort to boost growth even further, Qatar cut its overnight deposit rate by 50 basis points, the first reduction in more than two years, to 1.5%, effective August 11. Lowering the overnight interest rate was in line with the global and regional situation, the central bank said in a release. Other key rates, such as the overnight lending facility and the repo rate, were unchanged, at 5.5% and 5.55%, respectively.

The government received affirmation of its own due diligence when Standard & Poor’s raised the country’s long-term sovereign rating from AA- to AA in July. It also affirmed the country’s short-term ratings at A-1+, noting that its outlook is stable. The company said that Qatar is “weathering the global downturn well, with deflationary pressures and financial sector problems contained by the economic flexibility generated by new gas projects”. Standard & Poor’s also expects the country’s real GDP per capita to expand by some 11% in 2010, thanks to investments in the LNG industry, which it expects to raise production to 78m tonnes per year by 2012, up from 37m tonnes in 2009. The company says this growth will provide a cushion for Qatar’s fiscal and external accounts.

Indeed, Qatar’s economy is being buoyed by the many ongoing construction and development projects. Local press reported that as of June there were 18,000 buildings under construction – more than one for every 100 people.

Qatar’s population is expected to reach 2m by 2013, up from 1.3m today, which means that its construction boom must continue if it is to meet increasing demand. Ongoing projects include a major airport, the $20bn The Pearl – Qatar residential and retail development, the $5.5bn Musheireb downtown project and the $14bn Lusail City waterfront development.

The Pearl – Qatar, the country’s largest residential and retail development, expects its number of residential units to reach 4000 this year and double to 8000 by the end of 2011, an executive at the United Development Company told the Gulf Times in August. The Pearl – Qatar should be mostly complete by 2012, with more than 40,000 people living in some 16,000 units.

Work is also continuing apace on the Musheireb project, a development containing 200 buildings and 1000 residential units for the 27,000 people expected to live or work in the area by the time it is finished in 2016. The CEO of Dohaland, the project’s developer, confirmed in July that construction on the 35-ha site is on schedule.
Other projects under way include the Ras Laffan Industrial City; Education City, for which the local Midmac Contracting Company will later this year complete the $154m School of Foreign Service for Georgetown University; the New Doha International Airport; the Qatar-Bahrain Causeway; the Doha Expressway Project; and a national railway system. Also on the cards are several hospital projects, such as the $2.3bn Sidra Medical & Research Centre in Doha, which will initially house 412 beds, a number that is set to grow to 550. The completion date is set for 2012. This will be followed by a $1.1bn ear, nose and throat hospital at Hamad Medical City, the country’s centre for public health care services.

With the global economy starting to turn towards an upswing, if Qatar’s momentum on its myriad projects continues apace, the country looks likely to meet expectations for significant growth in 2010 and 2011.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Tuesday, 31 August 2010 10:12

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