DOHA: Rent-induced inflation is expected to be one of the key challenges for Qatari economy in 2014.
Driven by the huge size of project pipeline in Qatar, which will require an inflow of expatriate employees and generate a new pool of tenants, rents are expected to begin rising from next year, Standard Chartered noted in its latest report.
The report “Global Focus 2014-The Year Ahead” said non-hydrocarbon sector should be the primary growth driver of Qatari economy in 2014, with an estimated 15 percent growth rate versus 12 percent in 2013.
In September, the rental component of Qatar’s consumer price index (CPI) basket rose by 6.1 percent year-on-year.
Overall inflation in August, including the rental component, rose by 2.7 percent, up 1.5 percent excluding rents. The Standard Chartered maintains its 2014 inflation forecast of 3.5 percent for Qatar, having revised it in September from 2.5 percent, given the more positive growth dynamics related to the population and workforce.
“The economic outlook for Qatar in 2014 looks strong. LNG-sector dynamics are likely to remain healthy and will underpin strong fiscal and reserves positions; however, the non-hydrocarbon economy should be the primary growth driver in 2014”.
Government commitments on infrastructure in line with its bid to host the FIFA2022 World Cup and its longer-term Vision 2030 objectives have resulted in a significant pick-up in infrastructure investment in the economy in 2013. Standard Chartered expects these spending trends to continue but not peak in 2014.
A key challenge will be managing the different dynamics as the economy enters this growth phase.
The project spending is expected to remain strong in 2014. An estimated $183bn of investment is planned between 2011 and 2016.
“We forecast that at least another $34bn will be awarded in 2014 to key infrastructure projects. The private sector growth dynamics is expected to pick up significantly on the back of this. Qatar non-oil sector will grow by 15 percent in 2014 versus 12 percent in 2013,” the report said. The Standard and Chartered slightly raised its 2014 real GDP forecasts to 5.5 percent as non-oil dynamics accelerate.
The report noted Qatar’s net foreign asset position should rise to $345bn in 2014 from an estimated $295bn in 2013. “We estimate Qatar’s external debt at year-end 2013 to be around $140bn. We expect Qatar’s debt dynamics to strengthen over the next five years as its LNG sector has successfully positioned more of its exports to Asian markets, offsetting challenging market conditions in North America and Europe”, the analysts noted.
The Peninsula
