Economy underpinned by infrastructure spending and new gas field
Qatar is one of the global economys few bright spots this year. In early November after a visit to Doha in early November IMF managing director Christine Lagarde said that Qatars economic growth will accelerate to 4.5 per cent from 4 percent in 2014 and the near-term macroeconomic outlook remains strong.
The uptick in economic activity in Qatar comes as other emerging markets and commodity-based economies around the world struggle with slowing growth, and in the case of Russia and Brazil, economies that are contracting.
According to the IMF Qatar has bucked the trend with a large public infrastructure programme and the opening of a new natural gas field.
Over the past two years has awarded tens of billions of dollars of construction contracts for work on major new infrastructure projects such as the Doha metro, and over the past year spending on these schemes has begun to feed its way into the broader economy.
For other countries the construction frenzy would be severe burden on the governments coffers. For Qatar, the vast financial reserves accumulated over the past decade together with additional revenues from new gas fields, has allowed it to continue spending without having to pause to work out how its financial obligations will be met.
Qatar comfortable financial position should not lead to complacency. Blind spending will create problems in the future as lower oil and nature gas prices reduce fiscal surpluses.
Reassuringly, this is something that has already been recognised in Doha and some future projects have been rescheduled most notably the Sharq Crossing Scheme and the Al-Sejeel and Al-Karaana petrochemicals plants.
Such moves led to some disappointment from companies preparing to work on these projects. They should remember from a macroeconomic perspective prudent decisions are taken to allow Qatar remain on a strong footing.
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