IMF: Qatar 2012 Outlook Positive

The International Monetary Fund (IMF) has lauded the efforts being implemented by the State of Qatar to support strong growth in the non-hydrocarbon sector in the medium term and improve the living standards through the implementation of a large program of public spending, which coincides with an increase in oil and gas production and higher prices.  Qatar's economic outlook for 2012 remains "positive", the IMF said as it projected a 9% growth for the country's non-hydrocarbon sector next year.   Qatar's real gross domestic product (GDP) for 2011 is projected to accelerate to 19 percent, up from 17 percent in 2010, the IMF said in a statement after concluding its annual consultation with Qatar for this year.  The IMF expects nonhydrocarbon sector to grow by 9 percent driven by manufacturing, financial services, and trade and hotels, while hydrocarbon sector growth would peak from an increase in its production capacity of liquefied natural gas (LNG) to 77 million tons per annum (Mtpa).  While inflation is expected to decrease to 2.0 percent in 2011 (end-period 2.5 percent) compared with an average deflation of around 2.5 percent in 2010, according to the statement.  The IMF estimates the overall fiscal balance to remain in surplus of 2.7 percent of GDP, expecting the current account balance to record a surplus of 28 percent of GDP in 2011, up from 26 percent in 2010. Qatar's banking sector remains profitable and strong with a capital adequacy ratio of 22.3 percent, average return on assets of 2.7 percent, and non-performing loans ratio of 2.3 percent at end-June 2011, said IMF.  The nonfinancial corporates are also in an expansionary phase profits, cash is abundant, default rates are low, and financing conditions remain easy, it added.  The fund has also praised the number of policy measures, which were taken by Qatar Central Bank (QCB) since the second half of 2010 aimed at strengthening financial stability and managing liquidity.  "A cap on remunerated deposits of QCB and successive reduction in policy deposit rates to align with US policy rates proved successful in driving out short-term arbitrage funds that were intermediated through the banking system," said IMF.   In this context, the IMF explained how the issuance of government bonds and sukuk coinciding with the imposition of the cap on central bank deposits, and issuance of treasury bills in lieu of central bank certificates of deposit have facilitated the mopping up of structural liquidity from the banking system over a longer period, while shifting the cost from the central bank s balance sheet to the Government.  The IMF expects the fiscal and external to continue to record surpluses, as hydrocarbon prices are expected to remain high.  Continued government investment will keep growth in the non-hydrocarbon sector between 9% and 10% beyond 2011.  Qatar is focusing on the diversification and expansion of its economy beyond its hydrocarbons sector. The development of a broad knowledge-based economy is one of the pillars of the government s National Vision for 2030, the long-term development strategy approved by Emiri -decree (44) in 2008.