Qatar's real nonhydrocarbon GDP growth expected at 9% 

(MENAFN - Arab News) Qatar remains one of the fastest growing economies in the world. In 2011, the real GDP, as per IMF estimates, is expected to have grown by 19 percent driven by a 36 percent jump in LNG production. At the same time, increased activity in manufacturing, financial services, trade and hospitality is driving growth in the nonhydrocarbon sector which, as per IMF estimates, stood at 9 percent in 2011.

Simultaneously, high oil prices ensured that current account and fiscal surpluses remained very strong (32.6 percent and 7.2 percent of GDP, respectively, in 2011).

The economic outlook for 2012 remains positive, with real non-hydrocarbon GDP growth expected at 9 percent. The high expected real GDP growth along with the envisaged spending estimated in excess of 150 billion as per National Development Strategy by 2016 and a run-up to the 2022 FIFA World Cup will support bank lending, the Global Investment House (Global) said in its report.

In 2011 Qatar continued to sustain it regional leadership in terms of bank credit growth (28 percent) driven by public sector lending. Lending to the public sector increased by 45 percent in 2011 and represented 40 percent of total loans in contrast to an increase of 19 percent in the private sector.

Within the private sector, credit expansion was largely driven by the real estate and construction sector, which grew by 33 percent in 2011. It is worth noting that the lending to the public sector has grown at a CAGR of 47 percent in the last five years as against 25 percent increase in lending to the private sector and highlights the important role of the national banking sector in funding public sector projects and other activities.

Given the thrust on public sector lending in 2011, it comes as little surprise that the credit growth was strongest for the two public sector dominant banks Qatar National Bank (QNB) (47.3 percent) and Masraf Al-Rayan (MAR) (36.6 percent), followed by Commercial Bank of Qatar (CBQ) (24.0 percent) that is aggressively looking at growing its public sector portfolio. In comparison, the growth was relatively lower for Doha Bank (Doha) (15.7 percent) and poor in the case of Qatar Islamic Bank (QIB) (0.3 percent).

For QNB, besides the public sector, which grew by 65.5 percent, the growth was driven by real estate and personal lending which grew by 64.4 percent and 48.2 percent respectively, the Global report said.

Similarly, CBQ continued to see success through a focus on public sector projects which grew by 40 percent in 2011. However the bank recorded a relatively significant steep jump in real estate lending which grew by 95 percent.

MAR also witnessed a similar growth pattern with public sector lending growing by 39.6 percent. However, it was the real estate sector that was the highest contributor to this growth. Real Estate lending quadrupled and retail also witnessed a higher level of activity. In the case of Doha Bank, public sector (54.6 percent) and real estate (30.6 percent) were the main drivers for growth.

QIB's loan growth was however disappointing. Despite the benefit of regulatory pressure on conventional banks' Islamic portfolios, the bank recorded a weak loan growth. Lending to the public sector was down by 40 percent, although a big chunk of it was related to a single borrower in 1Q11. Lending to the retail was also down 22.3 percent. However, there was some pick up in the property sector lending in Q4, 2011 which helped QIB's total loan book growth to come out of red and post a marginal growth of 0.3 percent. Again, real estate lending was the main driver for QIB with 26.8 percent growth in 2011.

Going forward, the government's focus on developing the physical and social infrastructure will continue over the medium-term. This is expected to spur loan growth and sustain it at high levels.

Among the sectors, we expect Qatari banks' proportion of loan books to the public sector to expand over the near term, after which we expect public sector loan growth to slow as the large hydrocarbon projects reach completion. Nevertheless, we still expect public-sector-related loan growth to remain at double digits in the medium term. Within the private sector, near-term growth has been forecast to be mainly in the real estate sector and eventually trickle down to the contracting sector as projects get underway.

On the retail front, we expect a slight pickup in consumer lending following wage increases for Qatari public sector employees, with Qataris still accounting for the bulk of banks' retail business. Overall, we assume 2012 net loan growth of 16.2 percent for the sector.