Qatar will continue to raise money from local and global bond markets in 2017 to avoid putting pressure on the domestic banking sector, according to a report by BMI Research.
The world’s largest liquefied natural gas producer announced this month it expects to post a budget deficit of $7.8 billion (QR28.3bn) in 2017, with revenues and expenditure estimated at $46.72bn (QR170.1bn) and $54.49bn (QR198.4bn), respectively.
The 2017 budget, published last week, is based on the government’s expectations for oil prices to average $45 per barrel over the course of the year. The budget even plans “ambitious” rationalisation measures, including a 3 percent cut in wages and salaries, and a 9.6 percent decline in current expenditures (excluding wages and salaries).
“The Qatari government will keep issuing debt throughout 2017, although at a slower pace given lower financing needs,” BMI, which is part of Fitch Group, said.
In 2016, the government issued $16.4 billion (QR60.7 billion) in debt as part of an ongoing strategy to avoid depleting reserves.
BMI forecasts that global Brent prices will average $55 per barrel next year, allowing the country’s fiscal revenues to be “significantly” higher than projected by government.
“This will in turn give the government more leeway on the spending front; hence, we forecast spending to be higher than planned in the budget,” the report said.
BMI said it does not expect the government to make notable welfare cuts for citizens, citing “tremendous” fiscal buffers and a small citizen population. Qataris account for less than 20 percent of the population.
The report forecasts the Qatari government to post a modest deficit of 1.1 percent of gross domestic product (GDP) in 2017, compared with an estimated 5.3 percent of GDP in 2016.
One of the beneficiaries of the 2017 budget will be large infrastructure projects with 47 percent of budgeted spending dedicated to major infrastructure projects in the run-up to the 2022 FIFA World Cup. Transport infrastructure will account for 21.2 percent of total spending, as the government invests in expansion of Doha Metro.
Another report this week by Kuwait-based Global Investment House said the allocation includes $2.75 billion (QR10 billion) for rail projects, and the remaining amount will be invested in the development of Hamad Port, and a large number of roads (Lusail road, Al Rayyan road) and land reclamation projects in north and west Doha, Al Khor, Al Mashaf, Al Wakra, and Al Wukair.
“The execution of major development projects could positively impact economic growth,” it said, referring to the International Monetary Fund’s forecast on the country’s GDP to expand by 3.4 percent in 2017, making it the highest growth economy among the Gulf countries.