Soaring gas exports will ally with rebounding oil prices and production to catapult Qatar’s economy into double-digit growth in the next two years while its fiscal surplus will sharply widen, a key Saudi bank said yesterday.

The gross domestic product of the world’s third gas power is estimated to have swelled by 9.4 per cent this year despite the adverse impact of the global financial turmoil after leaping by nearly 14.3 per cent in 2008.

“The outlook for the next couple of years is bright. Three new 7.8 million tonnes a year LNG trains are expected to come on stream, while those which started operations during late 2009 should be producing at close to full capacity. Overall LNG output is expected to rise from about 40 million tonnes in 2009 to more than 75 million tonnes by 2012, with much of the increase occurring in 2010,” the Saudi American Bank Group (Samba) said in a study.

It said most of the LNG production is already contracted for export to foreign markets, and the rest will be sold on the open market.

Accompanying this expanded LNG capacity will be additional NGL (natural gas liquids) production, estimated at around 150,000 barrels per day, which will also be mainly exported, and an expected pick up in oil output as Opec gradually eases quotas, it said.

“While world gas prices may remain muted due to a relative abundance of supply, oil prices are projected to increase to an average of $75 a barrel in 2010 and $85 in 2011, and this will provide a further boost to earnings,” Samba said. “All together, the expected surge in hydrocarbons production and associated revenues will help propel real GDP growth in Qatar to 18 per cent next year and 13 per cent in 2011, with nominal GDP rising to $135 billion (Dh495bn), equivalent to a projected $84,000 per capita.”

The study said the surge in Qatar’s LNG output to more than 40 million tonnes last year from 30 million tonnes in 2008 allowed the country to avert the effects of the global crisis despite a sharp decline in its nominal GDP in the second half of this year because of lower crude prices.

“Bolstered by rising LNG and associated NGL output, the Qatari economy has been able to ride out the global economic storm during 2009 and post real GDP growth of an estimated 9.4 per cent,” it said.

“This has been driven by the combination of rising hydrocarbons output and increased public spending which has helped sustain a strongly positive momentum in the non-oil sector. However, strains remain in the real estate sector, which has suffered from a sharp decline in prices and, despite robust government support, banking activity has slowed considerably with annual credit growth dropping from more than 50 per cent to 10 per cent this year.”

It said while growth in constant prices has remained strong, Qatar has not escaped the impact of a steep drop in average oil and gas prices in 2009.

Even with the recovery in the second half, at an estimated average oil price of $62 a barrel, prices are down by about 35 per cent over last year’s average price of around $95, and gas prices have suffered larger declines, Samba said.

It said the price decline had seriously depressed nominal oil and gas GDP which, according to recently released official data, plunged by 42 per cent in the second half of 2009 compared to the same period last year.

While the non-oil and gas sector grew by 14.4 per cent – led by strong increases in the finance, insurance and real estate sector, and in construction – this was not enough to prevent a 24 per cent drop in overall GDP in the first half.

“We expect that stronger oil prices and increasing hydrocarbons production will boost overall nominal GDP in the second half of 2009, although at an estimated $85 billion the total will still be down by about 15 per cent.”

Turning to the budget, the report said Qatar’s revenues had been largely bolstered by the recent improvement in crude prices and rising LNG and condensate output in the second half of this year. Further gains are likely over the next few years as both oil prices and production/exports continue to rise.

“The resultant surge in revenues to $50bn a year will help raise the fiscal surplus from an estimated two per cent of GDP in 2009-2010 to around 7.4 per cent in 2011/2012, despite large increases in projected capital spending directed mainly at construction and infrastructure,” it said.

“The current account balance is expected to record a similar trend with surpluses rising back to more than 20 per cent of GDP in 2010-2011. These will help boost official reserves and assets held by various government entities such as the Qatar Investment Authority, the Qatar Foundation Fund, the Oil Stabilisation Fund and the Health and Education Fund.”

While there are no official estimates about the size of those assets, Samba expected them to be $100bn, ensuring that Qatar maintains a net external creditor position despite recent increases in external debt.

On top of these sizeable revenues and foreign assets, the government has raised $10bn through sovereign bond issuance during 2009 giving it a considerable war chest to support its development spending plans and to provide contingency funding to state-owned entities if necessary.

Despite the scale of the borrowing, Qatar’s sovereign external debt remains relatively low at around 14 per cent of GDP, and this ratio is likely to decline rapidly as GDP growth accelerates next year, Samba said.

“Total public and private external debt will likely peak as a share of GDP at more than g 80 per cent in 2009, reflecting new sovereign and private borrowing and the decline in nominal GDP, but will similarly fall back sharply thereafter.”

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