2006 Year in Review

Qatar

Economic News

22 Jul 2010
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2006 ended on a high note for Qatar as the host nation of the Asian Games, which wrapped up in mid-December. The state also used the gala event to showcase its economy and rapid development as a business and tourism destination.

Having brought together more than 13,000 athletes and officials, along with hundreds of thousands of spectators and a television audience that topped the billion mark, the Doha games were an outstanding success. And so they should have been, with more than $2.8bn invested to stage and run the event.

The games had a direct impact on the country’s economy, most of it positive, though there was a down side according to some. Apart from the lavish new sporting facilities and infrastructure gifted to the nation, the lead up to the games saw huge investments in the tourism and retail sectors, which will further serve to boost Qatar’s appeal to overseas visitors.

The emirate’s telephone operator Qtel spent big prior to the games, investing $137m in new technology including providing a professional mobile radio system and putting in place the infrastructure for broadcasting in Digital Video Broadcast-Handheld (DVB-H). Both will have a life after the games, the former to be used by the country’s emergency services and the latter for commercial broadcasts.

However, there were concerns that the heated competition for retail and accommodation space in Doha was one of the factors pushing up rents, with increases averaging 17.4% for the year. This flowed into the inflation rate, which averaged more than 8% in 2006, well above the Gulf Cooperation Council (GCC) countries’ level.

Another area that the games may have had a negative impact on, and that contributed to the heating up of inflation, was the rising costs in the construction sector, already one of the most active industries in Qatar. The drive to get all the games facilities ready in time for the December 1 launch meant that competition for workers, material and contractors was very fierce.

Qatar’s property market in general was again vibrant throughout the year, though throughout the region, the sector cooled slightly towards the end of 2006. This was in part due to investor concern about the hectic pace and a predicted easing of the previously stunning returns the property market had provided.

However, given that Qatar expects to see a 150% rise in tourist arrivals, spawning a 300% increase in hotel room numbers, within the next four years, along with a potential addition of 500,000 to the country’s population by 2012 – mainly additional workers to keep the economy’s wheels turning – all forms of property are going to be at a premium.

In line with the rest of the oil and gas producers in the region, Qatar again saw the nation’s coffers filled as energy prices remained high throughout 2006. The country has announced plans to boost its output of natural gas in the coming years, becoming the world’s largest supplier by 2010. During the year, it inked a number of long term contracts, with India alone seeking an additional 10m tonnes of liquefied petroleum gas annually.

With some of the most liberal legislation and regulatory regimes for foreign investors in the GCC, Qatar is seeing an increasing interest by overseas investors, and is now ranked third behind the UAE and Saudi Arabia in terms of FDI inflow.

In 2006, while much of the almost $2bn of foreign investments went down the traditional avenue of the energy sector, an increasing proportion was directed into other sectors of the economy, a pleasing result for the Qatari government that is actively working on diversification. There were growing investments in the electronics, minerals, and processing sectors as well as tourism and property development.

The growth rate of the Qatar economy is expected to slow in 2007,  from 7.5% in 2006 down to 5%, the second highest level in the region.


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