Global Arab Network | IMF Expects Qatar GDP to Reach 20% in 2011

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IMF Expects Qatar GDP to Reach 20% in 2011

Global Arab Network - - John Short

Thursday, 10 March 2011 23:57

The International Monetary Fund (IMF) projects Expects Real Gross Domestic Product (GDP) to expand to 20% in 2011 from 16% in 2010, Global Arab Network reports according to a press statement.

Executive Directors commended the authorities for the prudent policies during the global economic crisis which, coupled with an increase in gas production, have contributed to maintaining strong economic growth while safeguarding financial stability. Directors considered that the economic outlook is favorable, despite vulnerabilities to gyrations in hydrocarbon prices and global financial shocks. They stressed the need, however, to carefully monitor aggregate demand to prevent the resurgence of inflationary pressures. In the medium term, increasing productivity in the nonhydrocarbon sector will be key to promoting economic diversification.

Directors agreed that the current expansionary fiscal stance is broadly appropriate in view of the infrastructure investment needs and the comfortable fiscal position, but recommended the authorities stand ready to adjust policies if demand pressures reemerge. Directors encouraged the authorities to continue saving their hydrocarbon surpluses over the medium term to facilitate intergenerational equity. They stressed that containing current expenditures and broadening the tax base will be critical to reducing the budget’s dependence on hydrocarbon revenues. Directors underlined the importance of strengthening fiscal institutions to support these goals and welcomed the authorities’ intention to establish a macrofiscal unit and a debt office.

Directors considered that the main challenge for the central bank will be to manage the credit cycle without fuelling inflation. Given the pegged exchange rate, they recommended the central bank rely on macroprudential instruments to help contain credit growth and potential surges in capital inflows. Directors noted the staff’s assessment that the Qatari riyal is in line with fundamentals and agreed that the peg to the U.S. dollar remains appropriate. They encouraged the authorities to develop their technical and operational capacity in the event of a switch to an alternative exchange rate regime in the context of the monetary union.

Directors stressed that safeguarding financial stability remains essential. They welcomed the creation of the Financial Stability Unit and the results of the recent stress tests, which show the banking system’s resilience to market and credit risks. Directors also supported the authorities’ plans for establishing a single financial regulator to ensure harmonization of regulation and close regulatory gaps.

Directors noted that achieving strong and sustainable growth in the nonhydrocarbon sectors requires further efforts on structural reforms. They underscored that modernizing and strengthening the financial sector, including by further developing the local debt market, will be vital for supporting private sector diversification efforts. They also stressed the importance of improving the efficiency of public spending, more effective reforms in education and training, and greater encouragement to innovation for increasing Qatar’s competitiveness and productivity.

Directors acknowledged the efforts by the authorities to improve statistics, and noted that there is scope for improving the frequency, timeliness, and coverage of economic data. They underlined the need for greater coordination among data providers and welcomed the authorities’ intention to seek technical assistance in the compilation of the consumer price index.

Global Arab Network

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Published comments are the opinions of private individuals and do not reflect the views of Global Arab Network