The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, revealed that Qatar’s economic growth is strong while it still enjoys a boost from the World Cup in 2022. Qatar’s growth likely exceeded 4 percent in 2022, marking the fastest pace since 2015 and leaving the economy the largest it has ever been. However, the 2023 GDP growth forecast is still unchanged at 2.7 percent.
According to the Q1 report, Qatar’s expansion will be led by the non-oil sector this year, though the pace of activity will nearly halve to 3.3 percent, from over 6 percent in 2022. The February PMI reading showed business activity expanding for the first time since September last year, led by stronger demand in the wholesale and retail sector. Firms are feeling optimistic about growth over the coming year, with the 12-month ahead outlook soaring to a 41-month high.
Although energy prices are easing from 2022 levels, they will remain elevated, supporting Qatar’s macroeconomic environment. Due to higher prices in main export commodities, Qatar enjoyed one of the largest terms-of-trade improvements in 2022, with recent data showing the trade surplus widening to QAR355.2bn ($97.6bn) last year.
Public spending is expected to remain supportive of growth in 2023. High commodity prices underpinned a 54 percent year-on-year rise in budget revenue in 2022, pushing Qatar’s budget surplus to QAR89bn, the largest since 2014. Qatar’s 2023 budget, based on a reduction in spending and an oil price of $65pb, projects a surplus of QAR29bn, equivalent to 3.4 percent of GDP. Brent at US$86pb in 2023, significantly above the budgeted price. On that basis, a modest rise in spending and a surplus of QAR82bn is expected.
Qatar’s central bank opted to keep interest rates on hold in February, skipping the hike delivered by the US Fed for the first time this cycle. With inflationary pressures easing, Qatar’s monetary authorities will hesitate to tighten policy further, but ICAEW doesn’t expect rate cuts before 2024.