Qatar’s real GDP growth will accelerate from 6.8 per cent in 2014 to 7.8 per cent in 2016 as the non-hydrocarbon sector expands at a double-digit pace on higher investment spending and a growing population, a report said.

The share of the non-hydrocarbon sector in GDP will grow from 49.0 per cent in 2014 to 57.2 per cent by 2016, added the Qatar Economic Insight, September 2014, published by Qatar National Bank (QNB).

The report analyses how the economy continues its diversification phase through double-digit non-hydrocarbon growth, which is expected to accelerate through 2016.

The country’s economy has started a new diversification phase as large investment spending in the non-hydrocarbon sector accelerated growth to 6.5 per cent in 2013 as against 6.1 per cent in the previous year, while growth in the hydrocarbon sector slowed, the report said.

Inflation has slowed since mid-2013 (CPI inflation averaged 2.8 per cent in the first half of 2014) as rising rents were offset by lower global food prices.

Nevertheless, overall inflation is projected to increase moderately to 3.4 per cent in 2014 and 3.5 per cent in 2015 as rising rents outweigh lower food prices, said the QNB report.

There are risks, however, of higher inflation if the economy hits significant supply bottlenecks, it waned.

The government has ramped up budgeted capital spending, driving overall investment and economic growth, while the fiscal surplus increased to 15.6 per cent of GDP in the fiscal year that ended March 31.

“Lower hydrocarbon revenue and rising capital spending could narrow the fiscal surplus from 8.5 per cent of GDP in 2014/15 to 5.3 per cent in 2016/17,” said the report.

The government has recently earmarked $182 billion for project implementation over the next five years, of which $27.4 billion is in 2014/15.

Banking asset growth slowed to 9.4 per cent in the twelve months to end-June 2014 on lower public sector borrowing; non-performing loans (NPLs) were low at 1.9 per cent of gross loans at end-2013 and banks remained well capitalized, with the average capital adequacy ratio well above the QCB requirement under Basel III.

Bank lending is expected to rise by an average 10.7 per cent in 2014-16, increasingly driven by the expanding population and steady deposit growth averaging 12.5 per cent.

Low provisioning requirements and efficient cost bases will support continued strong bank profitability, the QNB report forecasted. – TradeArabia News Service