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Non-oil sector to boost Qatari economy in 2017: QNB report

Non-oil sector to boost Qatari economy in 2017: QNB report


Tribune News network
Doha
Despite low oil prices, the Qatari economy has continued to be resilient in the face of low oil prices as the country enjoyed the strongest non-hydrocarbon GDP growth in the region throughout the oil price decline, a report by Qatar National Bank (QNB) Group has said.
Qatari economy is expected to grow in 2017, driven by strong non-hydrocarbon sector growth due to higher oil prices, an increase in capital spending and fading drag from manufacturing, QNB said in its weekly report on Saturday.
The report pointed to the Ministry of Development Planning and Statistics' (MDPS) GDP data for the fourth quarter (Q4) 2016, released recently. The data showed real GDP growth was 1.7 percent in Q4 and 2.2 percent for 2016 as a whole, moderating from annual growth of 3.6 percent in 2015.
Growth in the non-hydrocarbon sector was 5.6 percent in 2016, the report said.
Construction was the largest contributor to growth, adding 2.3 percentage points (pps). Following construction, services such as finance (1 pps), government (0.8 pps) and real estate (0.6 pps) were the other key sectors supporting growth, said the report.
Underpinning and driving growth in these sectors was robust population growth of 7.3 percent in 2016, the QNB report pointed out.
These gains more than offset a contraction of 1 percent in manufacturing, the largest segment of Qatar's non-hydrocarbon economy accounting for 20 percent of the sector.
However, this decline is attributable entirely to lower output in Q2 2016 and appears to be a one-time occurrence, the report noted.
Meanwhile, the hydrocarbon sector contracted by 1 percent in 2016. This was due to declines in both crude oil and natural gas production, the report said.
Crude oil production, which accounts for around 15 percent of the hydrocarbon sector, fell by 0.7 percent in the year owing to maturing oil fields. Natural gas and related liquids production, the remaining 85 percent of the hydrocarbon sector, declined likely as a result of maintenance carried out on some of Qatar's liquefied natural gas trains during the year.
The report pointed out three key factors supporting higher growth:
Oil prices
QNB expects oil prices to pick up and average between $55-$60 per barrel in 2017, an increase of over 20 percent from the average level of $45 per barrel in 2016.
In addition to boosting government revenues, higher oil prices will improve consumer and business sentiment, leading to faster job creation, more spending on durable and non-durable consumer goods and higher investment, the report noted.
"Indeed, we have seen signs of that with the recovery in the fourth quarter of 2016, which bodes well for 2017," QNB said.
Capital boost
The government announced in its latest budget plans to raise capital spending by 3.2 percent in 2017. This was also accompanied by a commitment to increase the allocation to capital spending over the next three years, providing support to future growth. The increased allocations of capital spending will be on projects related to the upcoming World Cup, transportation, infrastructure, education and health. The government's commitment is enhanced by its strong balance sheet, the report said.
Manufacturing
The drag from the manufacturing sector should fade in 2017, the report said.
Manufacturing dropped 0.2 pps in 2016 compared to adding an average of 0.6 pps to non-hydrocarbon growth over 2014-15. The sector has already begun to recover, posting positive growth in Q4 2016, the report said.
A rebound in the sector will also be aided by the opening of a new refinery in Ras Laffan, which began production in December 2016, QNB report noted.

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