(MENAFN- The Peninsula) The Peninsula
DOHA: QNB has revised up Qatar's overall real GDP to 2.8 percent for 2018, from 2.5 percent previously.
The revised 2018 forecast is mainly because of three reasons. First, QNB has recently raised its forecast for oil prices from $55/b to $63/b, which will lead to higher incomes and spending in the non-hydrocarbon sector.
Second, QNB now expects a sharper rebound in hydrocarbon output as maintenance on LNG production facilities appears to have been dragged out in 2017, but should now be completed.
Third, the economic impact of the blockade has been less than expected and QNB has, therefore, reduced the expected drag from the blockade on 2018 GDP.
QNB noted in its weekly ‘economic commentary' yesterday, Qatar's GDP growth in the fourth quarter of 2017 was held back by the hydrocarbon sector. The latest data showed an unexpected drop of 6.4 percent in hydrocarbon production in Q4 from the previous quarter.
Given that crude oil production increased by 3.2 percent over this period, the drop in hydrocarbon GDP must be due to gas production, most likely as a consequence of temporary shutdowns for routine maintenance on LNG facilities.
Meanwhile, the non-hydrocarbon sector grew 1.6 percent in the fourth quarter, or 6.6 percent annualised, with the finance, wholesale and retail trade, construction and real estate sectors contributing the most.
For the full year of 2017, overall real GDP growth was 1.6 percent with the non-hydrocarbon sector growing 4.2 percent and the hydrocarbon sector contracting 1.1 percent. Lower oil and gas output in 2017 was due to both lower crude oil production and maintenance on LNG facilities.
'Looking forward, we have revised up our forecasts for growth in 2018 from 2.5 percent to 2.8 percent.., QNB analysts said.
The higher oil price is likely to give the authorities more comfort in relaxing fiscal constraints and raising investment, which should feed through to higher growth in the non-hydrocarbon sector, they added.
As hydrocarbon GDP was lower than expected in the fourth quarter of 2017 due to maintenance, QNB expects a sharper rebound in 2018 as LNG production facilities are restarted and as production normalises. Again, the impact of the blockade on GDP growth was less than expected in 2017.
Notably, the blockade should have had the greatest impact in Q3, but this turned out to be the second strongest quarter in the year. Additionally, the latest data release revised up growth in the non-hydrocarbon sector for Q3 from 3.7 percent year on year to 4.3 percent.
As we were previously expecting the impact of the blockade to be more of a drag on growth in 2018, this has led to an upward revision of our forecast.
To reflect these changes in the outlook, QNB has revised up its forecast for nonhydrocarbon growth in 2018 to 5.0 percent from 4.8 percent and for hydrocarbon growth to 0.5 percent from flat.
This implies an overall real GDP growth rate of 2.8 percent in 2018 up from our previous forecast of 2.5 percent.
In the longer term, Qatar's economy should benefit from a number of recent measures. Investment should be bolstered by new projects related to the expansion of LNG production and projects aimed at ensuring self-sufficiency and sustainability as well as an expected new law to allow 100 percent foreign ownership of new companies.
Therefore, QNB expects the underlying growth rate of both the hydrocarbon and non-hydrocarbon sectors to continue rising into the medium term.
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