01 July 2022
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Qatar: Record PMI supports bullish growth outlook

Record highs for the Qatari PMI survey are supportive of our view that real GDP growth in Qatar will accelerate this year

By Daniel Richards


We forecast real GDP growth of 5.1% in Qatar this year, which if realised would mark the fastest pace of growth since 2014 and take the economy back above pre-pandemic 2019 levels for the first time – growth last year was 2.5%, following the -3.6% contraction seen in 2020. Growth in 2022 will be broad based, with robust expansions in both the hydrocarbons (3.5%) and non-hydrocarbons (6.0%) sectors, and while we anticipate that the headline expansion rate will slow next year, at 2.8% it will remain stronger than the 10-year average.

Real GDP Growth, % y/y

Source: Haver Analytics, Emirates NBD Research

The 6.0% growth we forecast for the non-hydrocarbons sector would be the strongest in the GCC this year, driven by the ongoing recovery from the pandemic as activity gradually normalises, but also preparations for the World Cup and the event itself. The Qatar Financial Centre PMI survey has reflected the surge in activity as final preparations for the major global event, which begins in November, come to a head, with the June headline reading of 67.5 marking a record for the index. This was up from 63.6 in May and marked an average of 62.2 over the year to date. Output, new orders and purchasing activity were all at record highs, largely shrugging off the inflationary pressures which drove input prices to accelerate at the fastest pace in 21 months. A high level of backlogs of work suggest that activity will remain buoyant over the next several months, but firms are clearly wary of what happens after the World Cup as business optimism for beyond 12 months remained comparatively low.

PMI at record highs

Source: Qatar Financial Centre, Emirates NBD Research

Aside from the preparations for the event which have helped support growth in key sectors such as construction for years, the World Cup will also drive a significant uptick in activity through the four weeks of games over November to December, with the tourism and hospitality sector set to be a key beneficiary. Visitor numbers to Qatar have risen strongly so far as compared to last year – at 413,645 there were some six times as many arrivals over January-April as compared to the corresponding period in 2021, reflecting the loosening of any restrictions on travel both domestically and internationally (Qatar was forced to reintroduce some restrictions on activity as the Omicron wave spread at the start of the year, which will have weighed on activity in the first quarter). However, visitor numbers were still down -48% as compared to pre-pandemic 2019, leaving significant upside potential even in just a normalisation of activity. With the World Cup set to see 1.2mn visitors over the month, according to Qatari predictions, the likelihood is that 2019 visitor levels will be met by year-end which would provide a major fillip to growth.

Visitor arrivals, '000

Source: Haver Analytics, Emirates NBD Research

Qatar is not immune from the potential drags on activity that are facing the rest of the region – namely higher-than-usual inflation, tighter monetary policy and a stronger dollar – but the likelihood is that the substantial windfall generated by high gas prices will be more than sufficient for the government to support growth as it sees fit. We forecast a current account surplus of 18.3% of GDP this year, up from 5.2% in 2021. The Qatar Central Bank has hiked its benchmark interest rate in line with the Federal Reserve this year, but the liquidity boost from higher exports should offset this, while visitors for the World Cup are likely committed despite the relatively unfavourable exchange rate for tourists.

For domestic consumption, at 5.2% y/y in May price growth is high compared to the long-run average as the flurry of World Cup-related activity stimulates demand and global pressures come into play. However, employment has risen, petrol prices have been kept stable, and the prospect of any imminent introduction of VAT remains dim. While Bahrain has raised its VAT rate to 10.0% this year, and Saudi Arabia’s seems static at 15.0% for now, Qatari finance minister Ali al-Kuwari told Bloomberg in June that introducing tax hikes while inflation was already accelerating was not necessarily a wise move.


Written By

Daniel Richards Senior Economist

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