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Satyendra Pathak
Qatar’s overall growth is expected to accelerate during 2022-2024 because of the country’s hosting of the FIFA World Cup in 2022 and the investment spending on the expansion of liquefied natural gas (LNG) output capacity, Moody’s Investors Service has said in its latest report.
“During the course of 2023-27, Qatar Petroleum is targeting to increase its LNG production capacity to 110-126 million tonnes per annum (mtpa) from 77.5 mtpa. The LNG output increase by almost 60 percent will drive the country’s economic growth,” the global rating agency said.
“The Qatari authorities have also announced their plans to accelerate the Hamad Port expansion project by bringing it forward to 2020 from an initial target date of 2030. This will support non-hydrocarbon growth over the next several years,” the report said.
At completion, Moody’s said, the Hamad Port will be one of the largest deep-water seaports in the world with a capacity of 12 million twenty-foot equivalent units (TEUs).
The report, however, said that lower oil prices will shift Qatar’s budget into deficit during 2020-21. “The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and financial market turmoil are creating a severe and extensive economic and financial shock. For Qatar, the principal channel of transmission is the impact of lower oil prices on government revenues and
exports. In 2019, hydrocarbon revenue accounted for 79 percent of total government revenue and was equivalent to 25 percent of GDP,” the report said.
“We have reduced our year-average assumptions for the Brent crude benchmark oil price to $40-$45 per barrel in 2020 and $50-$55 in 2021, a 33 percent and 17 percent decline from the 2019 average, respectively. The impact of lower prices will take time to filter through in Qatar as the hydrocarbon exports are mainly liquefied natural gas (LNG) sold on long-term contracts with pricing that follows oil prices with a three to six month lag. For Qatar this means that the bulk of the fiscal impact of lower oil prices will materialize during the second half of 2020 and in 2021,” the report said.
“We expect that lower oil prices will reduce government revenue by about 5 percent of GDP in 2020 and another 2 percent of GDP in 2021. We in turn expect Qatar to post a fiscal deficit of 1.6 percent of
GDP in 2020, which will widen to 4.1 percent of GDP in 2021, compared to a surplus of 1 percent of GDP 2019. This forecast assumes that the decline in oil prices will be partly offset by lower overseas spending by Qatar Petroleum. The forecast also assumes that during 2020 the government will delay some nonessential capital spending, up to 2.5 percent of GDP, in order to
limit fiscal deterioration,” it said.
“We expect real hydrocarbon output to remain flat in 2020, after an unexpected decline of 1.9 percent in 2019, whereas we are assuming that the non-hydrocarbon sector contracts 1 percent after growing 1.1 percent in 2019,” the report said.
“We expect a drop in economic activity during 2020, after a 0.3 percent decline in 2019, resulting from the measures to suppress the spread of the coronavirus pandemic, which will mainly affect the transportation, tourism and hospitality as well as retail,” it said.
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