A Land of Plenty


Economic News

22 Jul 2010
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With news coming mid-month that Qatar has retained its position as the richest of all Arab countries, it was perhaps no surprise that a leading international ratings agency then decided to upgrade its country outlook for the state. With major investment projects in the pipeline, alongside a continuing flow of foreign investment, the statistics are certainly looking good for the months to come.

Data released by the Abu Dhabi-based Arab Monetary Fund (AMF) on June 13 showed that Qatar had a per capita income of more than $30,000 per annum last year, ranking it among the 20 richest nations in the world in these terms. Runner up in the Arab wealthy countries league was the UAE, some way behind on $19,755. Qatar's per capita figure was also up on 2002, when it had stood at $29,948.

So, with plenty of money to spend, Qataris look like doing just that in the months to come.

According to a report released June 20 by the Kuwait-based Global Investment House (GIH), Qatar plans to spend a colossal $54bn on infrastructure development over the next six years.

Some $9bn of this has been reportedly earmarked to be spent a per year over the next six years on infrastructure projects, with $5bn separately allocated for the New Doha International Airport project and a further $20bn set to be spent on tourism-related projects over the next six to 10 years.

The infrastructure projects mentioned in the report included roads, sewerage systems, buildings, health and education facilities.

One other development on these lines that has recently been in the headlines is the plan of Qatar Electricity and Water Corporation (Kahramaa) to expand its water distribution networks.

At present, Kahramaa operates some 33,300 km of these networks, supplying water to 90% of the Qatari market. Some 311.7 km of new water distribution is under construction in nine areas, including Wakra, Merikh, Duhail South, Waab, Soudan, Abu Hamour, Khilfiat and Ain Khalid. Kahramaa claims that 5,737 customers will benefit from the development over the next two years.

This huge investment programme is also likely to be supplemented by increased foreign interest, particularly as Qatar's international ratings have been recently climbing.

This week saw ratings agency Standard & Poor's upgrade the country's credit outlook to positive from stable, citing "solid" economic prospects and sound budget management as the factors behind the change. S&P also affirmed Qatar's "A+" long-term and "A-" short-term sovereign debt ratings.

Partly, this upgrade is as a direct result of what in many parts of the rest of the world is being seen as a growing threat to economic growth: rising hydrocarbon prices.

GIH, in its recent report, stressed this factor by saying that strong global crude prices and higher oil production should further bolster Qatar's economic growth. Oil and gas outputs and export volumes are also widely expected to climb because of continued government and foreign private investment in new energy projects. During the last decade, investment inflow into the oil and gas sector totalled some $28bn, with a similar inflow of $28bn to $30bn expected in the sector during the first decade of this century.

Yet the S&P report also stressed other, more structural developments behind its decision to upgrade.

While "these actions primarily reflect the country's very strong economic prospects - driven largely by the gas industry", an S&P statement said, these are "combined with continuous prudence in fiscal policy and the ongoing improvement in domestic political institutions."

The ratings agency was particularly pleased with the way in which the government has acted along with energy multinationals in developing the country's resources.

Naturally enough, there is also a downside to all this - the size of which depends on the significance of global energy price hikes to Qatar's overall performance. What goes up can also come down, and GIH in particular warned that a fall in oil prices could cause a reassessment of the country's growth prospects. This touches on the added importance of Qatar's other investment projects though - and its commitment to diversifying its economy away from hydrocarbon dependency.

Yet there seems every sign that Qatar is pushing ahead with plans to widen its economic resource base, with investment schemes working in parallel with efforts to develop industries and sectors such as tourism, which can provide some insulation from the ups and downs of the global energy market.

For now though, it seems Qatar is in the useful position of being able to benefit from high incomes from energy while investment in other areas boosts non-energy related sectors. If this continues, its position as the Arab world's richest country looks set to continue too.

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