Qatar

QATAR, the world’s largest exporter of liquefied natural gas and one of the smaller oil producing countries, has enjoyed significantly high economic growth.

It is now one of the richest nations in the world with GDP per capita exceeding $100,000 based on the purchasing power parity exchange rates.

Despite falling oil prices, the Qatari economy continued its strong performance, growing by 6.2pc in 2014. According to the latest data released by the Ministry of Development Planning and Statistics (MDPS), growth was driven by the non-hydrocarbon sector which expanded by 11.5pc on large investment spending. Hydro-carbon sector growth shrank by 1.5pc in 2014.

Qatar estimates the non-hydrocarbons share of GDP will overtake that of oil and gas in 2015. In 2015, the economy is projected to grow by a robust 7.7pc with a slight dip in 2016 to 7.6pc, despite the pressure on oil prices. The predicted growth rate in 2015 would be the country’s fastest expansion since 2011. Despite lower oil revenues, the government has a sufficient fiscal buffer of cash reserves to push ahead with an ambitious investment programme, including spending on infrastructure such ports and railways.

Foreign exchange reserves, currently around $42bn, provide an import cover of over seven months. In addition, the country’s sovereign wealth fund, managed by the Qatar Investment Authority, has assets of around $170bn. Total foreign assets, including official reserves at the central bank, foreign assets held by commercial banks and assets of the SWF, far exceed the country’s external liabilities. External debt ratios are relatively low, with total foreign debt stock at around 57pc of GDP and debt service ratio on existing obligations of around 8pc of export receipts.

National Vision 2030 project envisages increased spending to deliver a high standard of living for all its people. Besides preparations for football World Cup 2022, the investment plan includes projects such as a $36bn metro network for Doha and a nearly $2bn sewerage system.

According to the IMF, with one-third of global LNG trade, Qatar has emerged as an important global financial investor, labour importer, and donor. It will enter one of it’s busiest-ever periods of economic activity, with projects worth an estimated $150bn earmarked for tender before 2017. However, the recent large drop in oil and natural gas prices will lead to a substantial deterioration of the fiscal and external balances. Lower oil prices will lead to a substantial deterioration of the fiscal and external balances. The budget is expected to be in deficit from 2016 onward and the current account surplus will largely be eliminated.

There are signs that spending has become more cautious; some projects are being delayed or cut back. In January, state-owned Qatar Petroleum and Shell decided not to proceed with the $6.4bn Al Karaana petrochemical project in Qatar.

Oman

OMAN is a middle-income economy that is heavily dependent on oil resources. It possesses 5.5bn barrels of proven crude oil reserves which are 1.2pc of the total GCC reserves and almost 0.4pc of the world total reserves.

Petroleum accounts for 64pc of total export earnings, 45pc of government revenues and 50pc of GDP. Hydrocarbon sector represents one of the most important sectors of the Omani $80bn economy. The period between 2003 to late 2008 was the best for the Sultanate in terms of economic performance on the back of sustained high oil prices, which have helped build Oman’s budget and trade surpluses and foreign reserves.

Oman is a small independent producer but its crude forms part of the benchmark price for millions of barrels per day of exports from Middle East producers to Asia. It has a strong and diversified private sector, which covers industry, agriculture, textile, retail and tourism. The industrial sector is expected to continue on a long-term upwards trend with a host of value-added processing projects under development across the country. The Sultanate is actively pursuing a development plan that focuses on diversification, industrialisation and privatisation, with the objective of reducing oil sector’s contribution to GDP to 9pc in 2020.

Despite weaker oil prices, Oman’s economy is expected to grow by 5pc this year, against an estimated 4.4pc growth in 2014. The non-oil sector, driven in part by industry, is pegged to lead growth in 2015, with non-hydrocarbon GDP forecast to rise by 4.8pc, compared to a 4.5pc increase for the broader economy according to CBO. The finance ministry expects non-oil sector growth at 5.5pc based on higher activities in construction, electricity and water, trading and manufacturing industries. The IMF expects Oman’s non-oil economic growth to drop from 6.5pc last year to 5pc in 2015. It estimated real GDP growth at 4.6pc for 2015 and 3.1pc in 2016.

With prices falling by nearly half since June, Oman is facing new fiscal strains. In the 2015 budget, the finance ministry has increased spending at the cost of a big projected deficit due to the plunge in oil prices. While revenues are projected to fall over 2014 by 1pc at $30.12bn, government spending at $36.62bn for 2015, is higher by about 4.5pc. The 2015 budget shows a $6.5bn deficit which is almost 8pc of GDP, considerably larger than 2009’s deficit of 0.3pc. The country recorded a budget deficit of $1.56bn last year.

Achieving fiscal sustainability would require measures to contain expenditure growth and increase non-oil revenues. According to the IMF, ongoing efforts to pursue economic diversification are becoming more critical in the lower oil price environment. The Fund projects overall fiscal deficit to hit 14.8pc of GDP in 2015 and then remain in double digits over the medium-term in the absence of fiscal reforms. Without further fiscal adjustment, financing the projected cumulative fiscal deficit between 2015 and 2020 would exhaust fiscal buffers and raise debt to about 25pc of GDP.

Published in Dawn, Economic & Business, May 25th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play