Diversification of the economy is a key issue in the MENA region. According to latest Economic Commentary from the Qatar National Bank (QNB – January 4, 2015), Qatar’s non-hydrocarbon sector now over half of GDP as Qatar continues to drive economic growth, pushing its share of GDP to over half (50.7%) in Q3 2014 for the first time (from 49.0% in Q2 2014).
QNB states that “Real GDP growth accelerated to 6.0% in the year to Q3 2014 from 5.7% in the previous quarter, according to figures released by the Ministry of Development Planning and Statistics (MDPS). Rapid growth in the non-hydrocarbon sector averaged 11.9% in Q1 2014 to Q3 2014, even higher than our forecast of 11.2% for the full year (see Qatar Economic Insight September 2014 report). Non-hydrocarbon growth was spurred by large investments in major infrastructure projects and by the fast growing population. On the other hand, the hydrocarbon sector declined 2.8% year-on-year as a result of lower crude oil production and temporary gas production shutdowns for maintenance.
In summary, with strong growth, moderate inflation, high current account surpluses and rising project spending, Qatar’s economic momentum is expected to accelerate further. Furthermore, the impact of the recent oil price drop on Qatar is likely to be small. Non-hydrocarbon real GDP growth is expected to continue accelerating as the government implements its large scale investment programme ahead of the FIFA 2022 World Cup. The investment programme is unlikely to be impacted by lower oil prices despite lower hydrocarbon export receipts and fiscal revenues. While current account and fiscal surpluses will narrow, they should still be sufficient to cover government spending plans. In the hydrocarbon sector, we expect production to return to full capacity. The only gas project expected to add to growth is Barzan, which is only for domestic supply and should add incremental growth to hydrocarbon GDP annually during 2015-23.
Thus, the overall economic outlook remains positive and the key driver of growth will continue to be the non-hydrocarbon sector, supporting the diversification of the economy. In 2015-16, we expect project implementation to peak. As a result, growth momentum will continue to gather steam as the implementation of large infrastructure projects and robust population growth continue to drive double-digit growth in the non-hydrocarbon sector”.