(MENAFN- The Peninsula) The non-hydrocarbon sector continues to be the engine of growth in the Qatari economy, expanding by 8.9 percent year-on-year in Q1, 2015. The largest contributors to real non-hydrocarbon growth were construction, financial services and manufacturing.
"Qatar's economy registered strong performance in the first quarter of 2015, growing by 4.1 percent year-on-year. Growth was spurred by the strong expansion in the non-hydrocarbon sector. Hydrocarbon production, meanwhile, remained broadly stable", QNB's 'economic commentary' on Qatar noted yesterday.
Citing Ministry of Development Planning and Statistics (MDPS), QNB analysts said that construction activity increased 11.4 percent year-on-year as large scale infrastructure projects remain the main driver of economic activity in Qatar. Such projects include the new Doha metro, real estate projects such as Musheireb in the centre of Doha and Lusail to the north, as well as new roads, highways and further expansion of the new Hamad International Airport.
The implementation of infrastructure projects is attracting a large influx of expatriates, with population growing by 10 percent in Q1, 2015 over a year earlier. Rapid population growth is stimulating growth in the services sector like financial services (with annual growth rate of 9.8 percent in Q1), trade, hotels and restaurants (9.3 percent) and government services (5.8 percent).
As well as the "horizontal diversification" away from hydrocarbons, Qatar is also undergoing a "vertical diversification" process. This is reflected in the expansion in refinery and petrochemical activities to move up the hydrocarbon value chain. The strong growth in manufacturing (9.0 percent) is a confirmation of this type of diversification.
On the other hand, the hydrocarbon sector, which consists of crude oil and raw gas production, contracted by 0.1 percent year-on-year in Q1 2015 as a result of lower crude oil output as well as shutdowns for maintenance at gas facilities. However, we expect the hydrocarbon sector to recover in the medium term, as gas production is expected to increase due to the Barzan gas project coming on stream while crude oil and condensate production is forecast to remain stable.
As well as releasing GDP data for Q1, the MDPS has rebased the GDP series to a new base year, 2013 (previously 2004). GDP is typically measured by reference to the structure of the economy in a "base" year. The weight given to each sector depends on its importance to the economy in the base year. Qatar's old GDP data relied on a snapshot of its economy in 2004. The structure of the economy has evolved since then, and therefore, the base year was updated to 2013. As a result, the share of the hydrocarbon sector in real GDP has increased, reflecting higher oil prices in 2013 compared to 2004. As rebasing has increased the weight of the slower-growing sector (hydrocarbons) in GDP at the expense of the faster-growing sector (non-hydrocarbons), growth in 2014 was revised down to 4.0 percent from 6.1 percent before rebasing.
Overall, we expect the diversification drive to continue and for the non-hydrocarbon sector to increase its share of GDP. Low inflation, healthy fiscal balances and significant current account surpluses should provide a conducive macroeconomic environment for the growth momentum to continue gathering steam.
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