Rising government spending and subdued inflation will facilitate an increase in private consumption in Qatar, Fitch Solutions said as the researcher forecasts Qatari real GDP growth to inch up to 2.5% this year from 2.3% in 2018.
In its 2019 budget, the government announced its intention to substantially increase the number of public sector jobs, particularly within the health, education, defense and security segments.
Furthermore, the government has now postponed the planned implementation of a GCC-wide 5% value-added tax, which means that inflation will likely remain subdued over the quarters ahead.
â€œRising employment and subdued price pressures will create conditions that are conducive to household spending growth, which we forecast at 4.6% in 2019, compared with an estimated 3.6% in 2018,â€ Fitch Solutions said.
Investment will continue to expand, albeit at a significantly slower pace than in 2018. Fitch Solutions expect investment levels to remain high in Qatar over the quarters ahead, driven by large scale infrastructure projects linked to the 2022 FIFA World Cup and the government’s Vision 2030 economic diversification programme.
Rising hydrocarbon prices (and thus government revenues) have probably also served to underpin confidence in Qatar’s overall macroeconomic stability, Fitch Solutions said.
The â€œsharp outflowsâ€ of foreign funding sparked by the June 2017 outbreak of the GCC crisis have gradually reversed over 2018, the researcher noted.
Most investors based in the blockading countries appear to have completed their withdrawal from Qatar, while others (based in Asia and the West) have scaled up their presence in the country.
â€œForeign investors have likely been assured by a lack of escalation in the crisis, as well as Qatari authorities’ demonstrated willingness and ability to support the local economy, most notably through placing large amounts of foreign currency deposits with local banks to mitigate funding pressures over the period from second half of 2017 to first half of 2018,â€ Fitch Solutions said.