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Khatija Haque - Head of Research & Chief Economist
Shady Elborno - Head of Macro Strategy
Published Date: 26 January 2022
Qatar's economy grew 2.6% y/y in Q3 of 2021, driven mainly by the non-hydrocarbon sector according to official estimates. Accommodation and food service activities saw the biggest annual jump, growing 29.8% y/y, reflecting the continued recovery of a sector hit badly by coronavirus-related restrictions in 2020.
Transportation and storage activities registered an equally strong, 29.7% y/y growth, while manufacturing grew 6.1% y/y. Building & construction GDP grew 5.2% q/q and 4.8% y/y in Q3 as the country ramped up preparations for hosting the FIFA World Cup in late 2022. Hydrocarbons GDP decreased -0.7% y/y in Q3, while non-hydrocarbon sectors grew 4.7% y/y in Q3 2021.
We expect growth to accelerate in Q4 and estimate full year GDP growth at 2.5% in 2021. PMI data supports this view with the headline PMI reaching record highs in the final quarter of last year on surging new work and business activity. Employment in the private sector also increased but at a relatively modest pace. Companies surveyed remained largely positive about World Cup-related business opportunities in 2022.
In 2022 we expect the non-hydrocarbon sectors to see faster growth of 6%, boosted by hosting the FIFA World Cup in Q4 2022, with the oil & gas sector also expected to expand for the first time in almost a decade. We forecast headline GDP growth of 4.5% in 2022.
Source: IHS Markit, Emirates NBD Research
Qatar has approved its budget for the 2022 fiscal year, the country’s Minister of Finance announced in early December. Revenues are expected to reach to QAR196bn riyals, a 22.4% rise compared to last year’s budget estimates, the budget for 2022 has assumed oil prices to USD 55 per barrel. Expenditures are estimated to reach 204.3bn riyals, 4.9% higher than 2021. QAR17.8bn have been allocated to the education sector, or 8.7% of total expenditures, and QAR20bn have been allocated to the health sector, representing 9.8% of total expenditures. The estimated budget deficit for the 2022 fiscal year is QAR 8.3bn riyals. The Ministry of Finance noted the deficit will be addressed through current monetary balances and the issuance of local and foreign debt instruments if needed. However, given our more optimistic oil price forecast of USD 68/b for 2022, we expect the budget to record a surplus of around QAR 16.5bn (2.3% of GDP), even assuming higher than budgeted expenditure.
As of late January, Qatar has been reporting close to 3200 Covid-19 cases a day, with the record high 4000 infections a day mark crossed in mid-Jan. In response to the spike Qatar reimposed some restrictions on commercial activities, including a ban on the shisha services at restaurants, reducing operation capacity in shopping centers to 75% and limiting entry to fully vaccinated customers, limiting operations at health clubs and beauty salons to 50% of capacity, restricting public transport to 60% of capacity and limiting outdoor and indoor gatherings to 15 and 10 vaccinated people respectively. We expect the restrictions to weigh on Q1 GDP only, at this stage. Nevertheless, the risk of new waves of the coronavirus later in 2022 deterring soccer fans from attending the World Cup tournament in Q4 2022 is a key risk to our growth forecast this year.
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