19/04/2012 08:04 AST
Qatar needs to “reassess” the global market, especially in light of major gas discoveries such as those in the US, once the moratorium on LNG expansion expires in 2015, Institute of International Finance has said in an overview.
In Qatar, the moratorium on expanding liquefied natural gas (LNG) production capacity, in effect until 2015, will moderate growth, it said.
“But continued strength in public spending on infrastructure will maintain non-hydrocarbon growth of around 8% in Qatar through 2015,” the Washington-based IIF said in the overview published yesterday.
“Assuming (there are) no significant LNG production increases, growth prospects beyond 2012 would primarily be a factor of government spending, especially on infrastructure in preparation for the World Cup in 2022.
“A general sense of optimism pervades the private sector as plans are being announced for large-scale development projects. It is expected that the tendering and signing of major projects will take place starting in 2013,” IIF said.
Toward the end of 2011, Qatar’s LNG production reached a maximum capacity of 77mn tonnes per year, more than doubling in three years.
This is reflected in an increase of over 16% in real GDP last year, the sixth consecutive year it has recorded double digit growth. Growth in the non-hydrocarbon sector was also robust and in double digits for the sixth consecutive year.
Current LNG exports are subject to long-term contracts with buyers (20-30 years) where quantities are guaranteed on the supply and demand sides.
Additionally, higher oil prices, to which gas export prices are linked, and a 30% rise in LNG exports have enlarged Qatar’s current account and fiscal surpluses for 2011, IIF said.
Further LNG production increases, however, are subject to a moratorium (on the North Field) until 2015. “As a result, we expect Qatar’s economy to cool down considerably in 2012, with real GDP growth projected to slow to 8.3%,” IIF said.
Headline inflation in the country remains subdued, the overview said. The 12-month inflation rate was 1.2% in February 2012. Excluding rent, the inflation rate is around 4%.
Rent, which accounts for 32% of the CPI basket, continues to decline for the third consecutive year, IIF said. “We expect average inflation to remain around 2% this year. We forecast that inflation will be around 2.5% for 2013,” it added.
Additionally, lower policy rates and an apparent retrenchment by European banks to shore up capital at home, contributed to a “significant decline” in official reserves in 2011.
“This does not, however, undermine Qatar’s external position since the majority of its foreign assets are held with the country’s SWF, the Qatar Investment Authority (QIA), estimated at around $200bn,” the overview said.
IIF has estimated Qatar’s foreign assets at $185bn and forecast the assets to total $234bn (2012) and $276bn (2013).
According to the IIF, Qatar’s banking sector is “well capitalised and profitable”. The NPLs ratio was 2% at end-2011. Credit to the private sector grew at the fast rate of 16% in 2011.
IIF projects Qatar’s population to reach 1.8mn this year and 1.9mn in 2013.
Gulf Times
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