A definite maybe
As the oil price fluctuates, so does the sentiment around the effect it will have on the Qatar economy
After its huge drop last year, losing close to 50% of its value, the oil price is no longer yo-yoing but remaining relatively stable at just under $60 a barrel, the lowest in more than five years.
The industry however, is split on how it will affect Qatar, voicing a ‘definite maybe’.
According to Qatar’s Ministry of Development, Planning and Statistics, the economy is expected to expand 7.7% in 2015 with little impact from falling oil prices on the country’s finances.
But not everyone thinks so. While some sectors are saying that the construction sector is slowing down and citing projects being put on hold – such as in January, state-run Qatar Petroleum and Shell decided not to proceed with their $6.4bn Al Karaana petrochemical project in Qatar, which is worrying – others are saying that it’s a good thing, as not only will inflation drop but so will demand for materials decrease, releasing the endless blockages being experienced at the ports.
From almost Doomsday sentiment mooting the very unplugging of the Qatar economy, to nose-snubbing sentiment voiced recently by HE Abdullah bin Hamad Al Attiyah – ex-energy and industry minister and the president of the Qatar Administrative Control and Transparency Authority – who said: “In my opinion we can live with oil at $60 per barrel, even below it and we can live good, but the condition is that we cut cost and reform the budget” – the variety of opinion traverses the spectrum.
So what is it – is Qatar being affected by the drop or not?
Al Attiyah said Qatar’s developmental projects will not be affected by a decrease in oil prices and added that China and India have changed the demand dynamics globally and have emerged as major consumers of oil and gas, which is beneficial for Qatar which is the world’s top natural gas exporter.
Then Investment House’s chief executive, Hashem Al-Aqeel said that investment in Qatar is slowing generally because of weak oil prices.
(Investment House is a private Qatari investment bank that is 87% owned by Qatar Investment and Projects Development Holding Co (QIPCO), a local investment group.)
He said that in general, many investment projects in Qatar have slowed since oil prices began to plunge last year, also dragging down gas and oil prices: “The lower oil price is affecting Qatar – we are seeing a slowdown in the rate of investment here in construction, banking and energy sectors.”
He also made mention that most projects that were not related to the 2022 World Cup were slowing, and that investors were playing the waiting game to see what would happen to energy prices before they commit fresh money to
Al-Aqeel further pointed out: “From initial indicators you can see that bank deposits are lower so far this year, which will result in the institutioins having less liquidity to lend, and the loans will have a higher interest rate” – while Al Attiyah believes oil is unlikely to breach the $60 per barrel mark in 2015 and that the era of crude oil going for over $100 a barrel is a thing of the past.
So too, much has been said about the country’s substantial fiscal reserves.
It is believed that even if its oil and gas revenues shrink, Qatar’s vast reserves mean that the government can continue spending heavily on the economy for years to come.
But then again, reserves are reported to be dwindling, while the non-hydrocarbon sector has gained traction and is seen increasingly as a buffer against this, as outlined by the Minister of MDP&S, H E Dr Saleh Al Nabit, who said: “In 2015, with momentum still gathering in non-hydrocarbons, the sector’s share of GDP will overtake that of oil and gas, and continue rising in 2016 and beyond.”
It appears that nothing can be said definitively on the matter, other than in all likelihood, Qatar is possibly not going to feel the oil price drop – maybe.