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Qatar is well placed to withstand lower oil prices

DOHA — QNB Group has published its Qatar Economic Insight September 2015 report. The report examines recent developments and the outlook for the Qatari economy as it continues its strong growth based on large investment spending.

According to the report, Qatar is well-positioned to withstand lower oil prices thanks to its strong macroeconomic fundamentals including relatively low fiscal breakeven price, the accumulation of significant savings from the past and low levels of public debt.

The real GDP growth is expected to accelerate from 4.0 percent in 2014 to 4.7 percent in 2015 and 6.4 percent in both 2016 and 2017 as the government expands its investment spending program in the non-hydrocarbon sector.

Oil prices are also expected to stay lower for longer, averaging $55/barrel in 2015-16 on oversupplied markets, before rising to $60/barrel in 2017 as US shale output growth weakens.

Inflation is expected to remain subdued in 2015 as international food prices continue to fall due to slowing demand growth and the build-up in stocks after good global harvests.

Domestic inflation is also expected to remain weak in 2015, despite strong population growth, as additional housing units are lowering housing inflation

Overall inflation is projected to pick up in 2016 and 2017 owing to the expected recovery in food prices in 2016 and higher oil prices in 2017.

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According to the report, Qatar is well-positioned to withstand lower oil prices thanks to its strong macroeconomic fundamentals including relatively low fiscal breakeven price, the accumulation of significant savings from the past and low levels of public debt.

The real GDP growth is expected to accelerate from 4.0 percent in 2014 to 4.7 percent in 2015 and 6.4 percent in both 2016 and 2017 as the government expands its investment spending program in the non-hydrocarbon sector.

Oil prices are also expected to stay lower for longer, averaging $55/barrel in 2015-16 on oversupplied markets, before rising to $60/barrel in 2017 as US shale output growth weakens.

Inflation is expected to remain subdued in 2015 as international food prices continue to fall due to slowing demand growth and the build-up in stocks after good global harvests.

Domestic inflation is also expected to remain weak in 2015, despite strong population growth, as additional housing units are lowering housing inflation

Overall inflation is projected to pick up in 2016 and 2017 owing to the expected recovery in food prices in 2016 and higher oil prices in 2017.

Lower hydrocarbon revenue and higher capital spending are expected to result in small fiscal deficits in 2015-16 before higher oil prices lead to a surplus in 2017.

Hydrocarbon revenue is expected to decline with lower crude oil prices and production, but this will be partly offset by higher non-hydrocarbon revenue, supported by rising corporate tax revenue and strong non-hydrocarbon GDP growth

The government is expected to increase capital spending while rationalizing current expenditure.

Credit growth is projected to reach 10.5 percent in 2015, 11.0 percent in 2016 and 11.5 percent in 2017, on the back of project lending, increased lending penetration to the private sector and population growth.

The loan-to-deposit ratio is expected to stabilize at around 110 percent; NPLs are forecast to remain low during 2015-17 as asset quality is expected to be backed by the strong macroeconomic environment.

The outlook for banking is positive with low provisioning requirements and efficient cost bases supporting bank profitability.

This article was from Arab News, Jeddah, Saudi Arabia and was legally licensed through the NewsCred publisher network.

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