The global financial crisis is expected to stifle growth in Qatar but the country will likely be the world’s fastest growing economy in 2009 given its massive gas exports and overseas assets, according to a key Saudi bank.

Despite a sharp decline in oil prices and the country’s crude output, public expenditure will remain high, funded by the rapid increase in its LNG revenues and income from its enormous overseas investments, the Saudi American Bank (Samba) said in a study on Qatar’s economy.

The report said the bulk of the country’s assets are controlled by the government-owned Qatar Investment Authority (QIA), estimated at $50 billion (Dh183.65bn) to $60bn, besides official reserves and other investments held by the government.

“While the global economic outlook is increasingly challenging, Qatar’s fundamentals are strong. Large external surpluses, favourable demographics and growing LNG production will help maintain rapid economic growth,” the report said.

“While not immune to the crisis in the global financial markets, looming world recession, and falling oil and gas prices, Qatar is very well placed to weather the storm and is projected to continue growing at around 10 per cent in real terms in 2009. On the basis of most available growth projections this would make it the fastest growing economy in the world next year.”

The report said Qatar, which controls the world’s third largest gas wealth after Russia and Iran, is less exposed than other Gulf states to changes in crude prices as its increasing LNG exports are based on a variety of long-term contract prices ranging from 20 to 25 years and varying in their relationship to oil prices.

The report said a more pronounced contraction in business activity, particularly in real estate and infrastructure development, is a possibility, and this in turn could put banks and financial institutions under stress, adding that public funds may then need to be diverted to support banks and the real estate sector with adverse consequences for growth. “Qatar’s economy continues to grow strongly fuelled mainly by growth in gas exports, and an expansionary fiscal policy aimed at supporting large-scale investment in improving the country’s infrastructure,” it added.

Quoting government reports, the study said Qatar’s nominal GDP growth has averaged close to 30 per cent a year during 2003-2007, adding that it is expected to grow by a further 27 per cent in 2008. Over the same period, average real GDP growth has been above 10 per cent a year, and is expected to jump to nearly 20 per cent in 2008 as new LNG production trains come on stream and the economy benefits from record oil prices and booming credit growth.

The report said such strong rates of growth have transformed Qatar into one of the most prosperous countries in the world with its per capita GDP income expected to exceed $75,000 in 2008, among the highest 10 incomes. It quoted estimates by Qatar’s Finance Ministry that the budget surplus during fiscal year 2007-2008 exceeded 11 per cent of the GDP. But the surplus is expected to dip to about 8.5 per cent in 2008-2009.

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