According to a recent economic report compiled by the International Bank of Qatar (IBQ) and its partner National Bank of Kuwait (NBK), Qatar's economy, the fastest growing in the Middle East in terms of nominal gross domestic product (GDP), is expected to see the pace of growth sustained at high levels over the next five years and as a result, its economy could double in size by 2012. These findings are attributed to the government's expansion programme, favourable energy prices and high investment spending.
The authors of the report based their findings on Qatar's projected production capacity of energy supplies by 2012. An increase in oil production, which will reach 1m barrels per day, combined with increased LNG exports, which are expected to reach 77m tonnes per annum (Mta) by 2010, and rising gas to liquids (GTL) exports, will result in the Qatari economy doubling in size by 2012.
"The government actually expects this increase in production to come online before 2012, but we think this is probably a bit optimistic, so we anticipate 2012 as a more realistic timeframe," NBK told OBG.
In the past five years, Qatar has seen massive investment in the gas sector, which has bolstered and sustained economic growth. If crude oil remains the backbone of the economy, generating 60% of total export revenues, both oil and gas revenues continued to rise, reaching above $20bn in 2006.
These trends were confirmed by Ragavan Seetharaman, deputy chief executive of Doha Bank, who told OBG, "The main reason for the Qatari economic boom has been the oil boom. Other reasons are the modernisation and inter-regional Arabian investment flow."
He also told OBG that it is Qatar's natural gas expansion programme that will ensure a sound economic future.
"Qatar has taken a lead in gas, and we forecast huge revenues from this sector. The demand and the price have ensured that the economy has done very well," he said.
In 2006, GDP expanded by 24%, after averaging 30% per annum in the three previous years. Real growth remained high, supported by solid gains in hydrocarbon output and major investment flows. Meanwhile, the non-oil sector continued to do well, suffering only slightly from the impact of the correction in the Doha stock market in early 2006.
However impressive this performance may be, the rapid growth rate has exacerbated resource constraints and mounting prices, with consumer price inflation hitting a new record high of 15% in the first quarter of 2007, caused by soaring rent, fuel and energy prices.
Prior to 2004, inflation in Qatar stood at 3%, rising to 11.8% in 2006 while excess demand for housing and office space began putting pressure on the construction sector in 2003. Expansionary fiscal policy also contributed to the acceleration in inflation, together with signs of a wage-price-inflation spiral.
"Unless structural adjustments in the housing market stabilise rents, the risk of accelerating inflation is not expected to abate. With monetary policy remaining largely accommodative, high inflation may well become entrenched in the economy with long-lasting negative repercussions on the real economy," warned the IBQ report,
On a more positive note, Basel Gamal, the chief executive of Ahli Bank, told OBG, "I feel we will continue to see growth for the next five to ten years. The government budget is a reflection of this growth and they're investing heavily in infrastructure for the future."
