Barzan project to raise Qatar gas production
25 July 2017
Qatar’s oil and gas sectors, suffering from the fall in energy prices, should help support growth in 2017 with the start of production at the Barzan facility, which would increase liquid gas production by 21 per cent, a report said.
Meanwhile, economy in Qatar is expected to remain resilient in 2017, despite a disappointing GDP growth of 2.7 per cent in the first quarter (QoQ), after a 4.1 per cent growth in the last quarter of 2016, according to the new report from global insurer Coface.
Inflation should level off in 2017, the report said. “However, prices are decreasing for housing, recreation and restaurants, which could foster consumption. Nevertheless, the introduction of a uniform 5 per cent VAT rate across all GCC countries is expected to increase prices after being implemented in 2018.”
“The non-oil and gas sectors were dynamic in 2016, and they will continue to be, driven by construction (+11.7 per cent QoQ in the first quarter of 2017) and the services sectors,” Coface said in the new report.
Construction sector remains one of the leading beneficiaries of the Qatari government’s investment policy for the Fifa World Cup 2022. Although a moratorium has been imposed on new projects, already scheduled investments are substantial and estimated at the equivalent of almost $180 billion. The services sector (financial services, property and telecommunications) should see strong growth in 2017.
The public balance dropped into its first deficit in 2016 after years of surplus. Budget incomes, dependent both on oil and gas revenues (more than 40 per cent of total budget revenues) and transfers from parapublic entities related to the hydrocarbons sector, were doubly hit by the fall in the price per barrel.
Despite its very substantial assets, the country is planning on financing the public deficit both with indebtedness on the international markets, as borrowing in the domestic market is problematic, and with an increase in the prices of public services. The public debt could continue to increase significantly.
Qatari banks remain well capitalized and profitable, despite the impact of declining oil and gas revenues now starting to affect their health. The expected tightening in US monetary policy and the amount of capital committed to the country’s infrastructure projects pose a high risk in terms of banks’ liquidity levels, through pressure on deposits.
External accounts have felt the full impact of the fall in oil and gas prices that represent the largest proportion of the country’s exports. The current account surplus should improve in 2017, thanks to a recovery in exports which grew by 15.6 per cent YoY in the first quarter of 2017.
However, the income balance is expected to continue in deficit but at a lower level. The slowdown in the outward flow of Qataris investments abroad and the increase in the gross external debt will result in a reduction in the financial account deficit.