(MENAFN- The Peninsula) Qatar's current account surplus, which now stands large by international standards, is projected to narrow down going forward, separate forecasts by two leading banks in the region have noted.
The country's current account surplus, currently at an estimated 27.6 percent, is projected to narrow to 21.2 percent of GDP in 2015 and 16.6 percent in 2016. A combination of plateauing LNG and crude oil exports, softer energy prices and rising imports will weigh on Qatar's current account surplus, NBK said in its Mena outlook for the first quarter of 2015.
In a separate note, QNB analysts also forecast Qatar's current account and fiscal surpluses will narrow in the coming years. But added, "they should still be sufficient to cover government spending plans."
In the hydrocarbons sector, the QNB analysts expect production will return to full capacity. The only gas project expected to add to growth is Barzan, which is only for domestic supply and should add incremental growth to hydrocarbon GDP annually during 2015-23.
According to NBK analysts, Qatar's export growth is expected to level off during the period. The commissioning of the Barzan facility should provide some increase in exports of products associated with gas production such as liquefied petroleum gases (LPG) and petrochemicals. Imports, on the other hand, will continue to be spurred by population growth and materials and services needs of the development plan.
"Public debt, dropped in 2013 to 32 percent of GDP as government-issued bonds and sukuk matured. The government is also channelling more of its surpluses towards capital and development spending. Debt issuance, however, in the form of T-bills and bonds continues apace as the authorities manage liquidity and further develop the domestic debt market," they said.
NBK also forecast a slowdown on the pace of accumulation of Qatar's foreign exchange reserves. Qatar's international reserves increased to a record high of $45.3bn in October 2014. This is equivalent to more than 8 months of import cover. The pace of reserve accumulation, however, has slowed in 2014 in line with slowing export growth, it said.
Qatar's headline inflation is forecast to accelerate from an expected annual average of 3.1 percent in 2014 to 3.4 percent and 4.1 percent in 2015 and 2016. The main impetus is rental inflation, which comprises 32 percent of the CPI basket and which was trending at 8.2 percent year-on-year last October. Rents are likely to feature significantly as an inflationary impulse during the next two years as a result of limited supply of residential housing units and burgeoning population growth, which is expected to be close to 10 percent year-on-year by year-end 2014.
The country's real estate price index, which tracks the price of land, villas and apartments in the country, increased by a record 42 percent y-o-y last September. Prices are expected to continue to rise given the premium commanded by land in the context of the country's ambitious infrastructure development plan.
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