Analysts: Inflation, construction delays slow Qatar’s growth

Delays in the many mega projects Qatar is planning in the run-up to the 2022 World Cup, including the $17.5 billion new airport, a $5.5 billion new sea port and more than $40 billion on railways, are suppressing the country’s stock market, Reuters reports.

Contracts for many of these projects will now not be awarded until next year or 2014, the news service said.

The country’s main equities index is down about 2 percent this year, after a small 1 percent rise last year. In comparison, Dubai’s index has risen 19 percent this year, though arguably that is the result of its recovery from recent financial woes.

Still, Qatar’s market will likely not pick up much once contracts are awarded, Reuters adds:

Although the government is expected to encourage them to take part in projects, local companies will often lack the size or all of the necessary expertise to participate, meaning foreign firms will inevitably take a large slice of the pie.

This will benefit the Qatari economy, where the foreign firms will spend money and hire workers, but it will not necessarily boost the bottom lines of listed Qatari companies.

Meanwhile, HSBC analysts warn that rising inflation is also having an effect on Qatar’s growth, Gulf Times reports.

The analysis comes as the head of Qatar’s National Food Security Program remarked on the difficulties faced by many families due to the increasing cost of food in Qatar. 

HSBC has forecast that the Qatari economy will only grow only 5.2 percent next year, compared to 14.1 percent last year and 16.7 percent in 2010.

Reuters analysts, interviewed in March this year and quoted in Gulf News, concluded that Qatar’s growth is slowing largely due to “a self-imposed moratorium on new hydrocarbon projects” designed to conserve resources.

HSBC added that Qatar had a budget surplus of $2.5 billion in the first quarter of this year – more than enough to fund the Emir’s announcement of a 114 percent increase in health spending and a 35 percent jump in education investment over the next three years. 

Thoughts? 

Credit: Photo by Omar Chatriwala

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