The engine of Qatar's economic growth was under close scrutiny this week in Doha, as the Institute of International Finance (IIF) Regional Economic Forum for the Middle East and North Africa got underway. Hosted by Qatar National Bank, IIF members presented their country report for the current year, in which they praised the country's economic policy mix.
The report noted that macro-economic management is conducive to maintaining domestic and external financial stability, whilst Qatar's substantial external borrowing is mostly related to high-yield and export-oriented projects. This has contributed to an exceptional pace of development and diversification, which means the massive endowment of resources that the country enjoys is set to offer further potential.
Nominal GDP is projected to rise from the $21.5bn recorded in 2003 to an all-time high of $25.9bn by the end of 2004 - then reach a staggering $27.5bn in 2005. Real GDP growth for 2004 is expected to be 7%, rising to 7.3% next year. Whilst external debt is also expected to rise - from $15.3bn by the end of 2004 to $16.8bn by the end of 2005, the fiscal surplus widened to around 10% of GDP between 2003 and 2004, and consumer price inflation remained at a low 2.3%.
Externally, the books also look good; the rapid rise in hydrocarbon export values pushed Qatar's current account surplus to 26.5% of GDP in 2003 and the enduring environment for gas and oil will have kept this trend going despite the growth in import demand. Some point to the sensitivity of GCC economies to a potential fall in hydrocarbon prices. However, the report states that Qatar, due to the high level of hydrocarbons it exports per capita, can maintain a balanced budget and, moreover, afford larger increases in government spending.
Speaking at the event was Saeed al-Misnad, CEO of Qatar National Bank. He highlighted how successful the country's development strategy had been. By broadening revenue sources through the export of abundant natural gas resources and undertaking petrochemical and gas-to-liquid projects instead of relying only on oil for the majority of both exports and government revenues, a firm basis for domestic growth had been laid.
He went on to say this was evidenced by the noticeable turnaround in both the balance of payments and fiscal positions in recent years, as a result of exports increasing by 85.5% in the past five years to $13.4bn in 2003. After almost 15 years of deficits, the state budget recorded its first surplus in the fiscal year 2000-2001, which has continued up to now, he said.
According to the IIF's forecast, Doha's annual hydrocarbon export will average nearly $16bn annually over 2004 and 2005 on the back of high prices, increased production and further hikes in LNG sales.
The diversification strategy in Qatar's hydrocarbon sector is currently the beneficiary of a huge investment that will reach up to $60bn by the end of the decade, according to Abdulla bin Hamad al-Attiyah, minister of energy and industry, who was also speaking at the event.
"Such a large volume of investment reflects the attractive investment climate in Qatar and the confidence financial institutions place on the projects being undertaken in the country." He told the high-level meeting, "The stamp of confidence is verified by the leading credit agencies which successively upgrade the sovereign rating of Qatar."
"An integral part of our plan to monetise our gas resources and broaden the economic base by way of forward integration, is through investment in added-value gas-based petrochemical projects," he further explained.
Al-Attiyah went onto predict that LNG production and export capacity is set to reach around 77m tonnes per annum by 2010, of which one-third will be destined for the US, Europe and Asia. International demand for the nation's biggest export was clear this week as Royal Dutch/Shell announced that it will source LNG from Qatar for distribution in India as early as the first quarter of 2005, as it redirects surplus from its projects in the Middle East to South Asia.
The announcement also came this week that the Korea Gas Corporation, the world's largest importer of LNG, will buy 131 cargoes of the fuel, totalling 7.86m tonnes from Qatar and Malaysia by April 2008. Of this, 64 cargoes, totalling 3.84m million tonnes, will come from Qatar's Ras Laffan Liquefied Natural Gas Company, with deliveries expected to start in November 2005 and run until March 2008.
The overall macro-economic picture reflects favourably on Qatar's policy strategy, and this in turn has impacted most favourably on the Qatari people. The world's richest nation per capita is expected to be the world's most even-richer nation, as per capita income is set to streak across the $33,000 mark by the end of 2004, then flourish to an astounding $33,500 by the end of 2005.