Statement by the IMF Staff Representative

Budget revenue in FY2006/07 amounted to 42 percent of GDP, with hydrocarbon revenue mirroring rising oil prices. The current account recorded a surplus of about 31 percent of GDP in 2006. Monetary conditions were characterized by ample liquidity and strong credit growth. Qatar’s medium-term (2008–12) outlook is favorable. As of June 2007, annualized inflation was estimated to have risen to 13 percent, compared with 12 percent during 2006. Designing a credible transition plan to implement the vision of a single financial market will be challenging.

Abstract

Budget revenue in FY2006/07 amounted to 42 percent of GDP, with hydrocarbon revenue mirroring rising oil prices. The current account recorded a surplus of about 31 percent of GDP in 2006. Monetary conditions were characterized by ample liquidity and strong credit growth. Qatar’s medium-term (2008–12) outlook is favorable. As of June 2007, annualized inflation was estimated to have risen to 13 percent, compared with 12 percent during 2006. Designing a credible transition plan to implement the vision of a single financial market will be challenging.

November 26, 2007

1. This statement provides information on recent developments in Qatar that has become available since the staff report was circulated to the Executive Board on November 7, 2007. The new information does not change the thrust of the staff appraisal.

2. The World Economic Outlook (WEO) oil price projections were revised in November 2007, resulting in changes to staff projections for oil and gas export and fiscal revenues. The 2007 average petroleum spot price (APSP) is now projected to average $71 a barrel, about 4 percent higher than in the September 2007 WEO baseline. As a result, the external current account surplus for 2007 is expected to increase by about 2 percentage points over the projection in the staff report, to reach 35 percent of GDP (Table 1). The surplus will remain high over the medium term. It will rise sharply in 2008 (to 43 percent of GDP) owing to the significant increase (18 percent) in the new WEO oil price forecast, before declining steadily afterwards to below 36 percent of GDP by 2012. The impact of the oil price increase is not as large on the fiscal side, as only a portion of the earnings from gas exports is reflected in the fiscal accounts. As a result, the government’s fiscal balance in 2007 is now expected to be over 1 percentage point of GDP higher than indicated in the staff report. On average, the overall fiscal balance for 2008–12 is projected to increase by almost 3 percentage points of GDP relative to the projections presented in the staff report.

3. On November 1, the Qatar Central Bank followed the U.S. Federal Reserve Board’s decision of October 31, 2007 and cut its deposit facility rate by 25 basis points. Data on inflation in the third quarter of 2007 are not yet available. The stock market continues to recover. As of November 20, the market index has increased by 34 percent relative to end-2006. However, it is still by 26 percent lower than the peak reached in September 2005.

Table 1.

Qatar Selected Economic Indicators, 2007–12 (revised) 1/

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Source: Fund staff estimates and projections.

The revision reflects: (i) the changes in WEO oil prices (the revised projections are based on the November 8, 2007 WEO forecast); and (ii) the impact of the higher oil prices outlook on the

Qatar: 2007 Article IV Consultation: Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Qatar
Author: International Monetary Fund