ACTIVITY GROWTH TO MILDLY DECELERATE

After solid growth in 2022 amid elevated natural gas prices and the Soccer World Cup, the Qatari economy is expected to expand in 2023, although slower, in line with global stagnation risks. Moreover, significant fixed investments related to the World Cup held in November-December 2022 will have been completed. However, monetary authorities are set to implement the Vision 2030 diversification plan, which is estimated to support private sector investments. Rising per-capita income will support personal consumption, accounting for nearly 20% of GDP. The non-oil sector, such as services and construction, will continue to fuel GDP, but the critical contributor will remain hydrocarbon revenues (nearly 40% of GDP). While oil production is expected to increase by around 0.5% in 2023, gas production will rise by 2% to about 183 cm after an increase of 3% in 2022. Although the emirate is investing in new LNG production to increase its share of global output by selecting international partners, the positive impact of new investments will need some time to materialize. Pent-up demand unlocked after the COVID-19 pandemic combined with the positive effects of the Soccer World Cup 2022 will continue to raise tourism revenues as total arrivals are estimated to rise by around 40% in 2023, and tourism revenues to jump to 10% of GDP from about 5% on average between 2010 and 2020. Growth in transport infrastructure is estimated to decelerate, but expansion in the energy and utilities sub-sector will continue, given Qatar’s water scarcity. Inflation will remain above pre-pandemic levels, although it will ease in 2023 thanks to a tighter monetary policy implemented in line with the US Fed’s steps due to the currency peg and slower private consumption after the end of the World Cup. However, upside risks remain owing to globally elevated food prices.

CURRENT ACCOUNT AND BUDGET SURPLUSES TO NARROW SLIGHTLY

Lower hydrocarbon prices resulting from the global economic slowdown are expected to crimp Qatar’s fiscal surplus in 2023, with hydrocarbon revenues accounting for around 60% of the total. Indeed, Qatar’s natural gas sales are historically tied up in medium- and long-term contracts, particularly with Asian clients. Qatar exported nearly 70% of its LNG to Asia in 2021 compared with 67% in 2017, while Europe’s share declined to 21% from 23%. This may dampen hydrocarbon revenues. Meanwhile, non-hydrocarbon incomes are rising due to higher corporate payments in line with the surge in tourist inflows. By contrast, the government is expected to continue to uphold fiscal discipline on the expenditure side, particularly in line with the completion of World Cup-related projects. The latter also contains goods imports necessary for construction projects. Lower hydrocarbon prices and moderate gas and oil production growth will weigh on export revenues (hydrocarbon accounting for nearly 90% of total goods exports). In the meantime, hosting the Asia Cup football tournament and World Horticultural Expo in 2023 will support tourism inflows that will help offset the narrowing of the surplus in the goods trade. The total assets of Qatar Investment Authority (QIA) are estimated at around 200% of the GDP. Its overseas investments include various sectors such as sports, entertainment, media, ports, real estate, retail, airports, etc. This approach helps the emirate to spend the external surplus while increasing the country’s prestige and generating additional investment income.

POLITICAL STABILITY SET TO CONTINUE

Political stability in Qatar is not threatened as the local population is primarily satisfied with its quality of life and living standards, partly on the back of social expenditures. No known faction exists on the political stage, as the government stands united behind the Emir who appoints it. Qatar has established balanced diplomatic relations with various countries, including Iran, which has helped the emirate and provided daily supplies of medication and goods during the Saudi- and UAE-led boycott between 2017 and 2021. That said, further improvement of these ties may create tensions with the rest of the Gulf states and the US, which has a military base there. Economic and trade relations between Qatar and Egypt, which was also a part of the boycott, continue to improve and should result in more investment opportunities for both countries. The QIA is reportedly holding talks to purchase stakes in some Egyptian state-owned companies.