QNB group: Qatar's growth momentum picks up further

Qatar’s economy accelerated in the first quarter of 2014, driven by strong growth in construction, financial services and trade, restaurants and hotels, according to figures released last week by the Ministry of Development Planning and Statistics (MDPS).
Qatar real GDP growth accelerated to 6.2% in the year to Q1 2014 with the non-hydrocarbon sector expanding by 11.5% owing to rapid progress with the implementation of major projects. The pickup in growth came despite a 1.2% contraction in hydrocarbon real GDP as a result of falling crude oil production and flat production at LNG facilities.
QNB Group expects real GDP growth to continue to pick up during 2014 as hydrocarbon production stabilizes and non-hydrocarbon growth remains high. Overall, the new GDP data are in line with our expectations for real GDP growth of around 6.8% in 2014. In 2015-16, we expect momentum to continue to gather steam owing to the ongoing implementation of major projects, with growth rising to an average of 7.7%.
Strong growth in the non-hydrocarbon sector has been driven by a pickup in major infrastructure investment projects since the middle of 2013. This has led to rapid growth in construction, which expanded by 19.6% in real terms in the year to Q1 2014 and contributed 2.3% to overall growth. Rising project activity has also led to a rapid increase in the number of workers being employed in Qatar, pushing up population growth to 11.6% in the year to end-March 2014.
In turn, this has helped boost growth in services sectors. Services contributed 4.2% to total real growth, with sectors such as financial services and trade, restaurants and hotels fairing particularly well.
The data confirm the continued process of diversification in Qatar away from hydrocarbons. With hydrocarbon production expected to continue plateauing in the medium term, the non-hydrocarbon sector is projected to play a more significant part in driving growth in the economy.
Looking forward, the continued implementation of infrastructure projects should maintain high non-hydrocarbon growth. A number of major projects are well underway, notably the new metro in Doha, major real estate projects in and around Doha, such as Musheireb in the center of old Doha and Lusail to the North, and new roads, highways as well as a further expansion of the new airport.
Completion of most of these major projects is scheduled from around 2018. The implementation of these projects is, therefore, likely to continue to drive growth, directly through higher investment spending, and indirectly as an increasing number of workers are attracted to work in Qatar.
Based on planned projects, QNB Group expects population growth to average 10.1% in 2014 and we expect it to remain strong going forward to support infrastructure development. Such high levels of job growth should boost domestic consumption, supporting the services sector and providing further impetus to non-hydrocarbon GDP growth. QNB Group expect growth in the non-hydrocarbon sector to average 11.5% in 2014-16.