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Qatar: Crude production increases

Qatar's crude oil production is expected to stabilise in the coming months

Crude oil production rose to 642,000 barrels per day (b/d) in May 2015 from 635000 b/d in April.
Crude oil production rose to 642,000 barrels per day (b/d) in May 2015 from 635000 b/d in April.

Qatar’s crude oil production is expected to stabilise in the coming months.

Production rose to 642,000 barrels per day (b/d) in May 2015 from 635000 b/d in April. QNB’s monthly economic monitor observed that while crude oil production is expected to stabilise, the Brent crude oil prices is also expected to average $56.2 per barrel, close to its average so far this year.

QNB’s research noted that Qatar’s overall balance of payments recorded a small deficit in Q4, 2014 of $0.5bn. On the back of lower hydrocarbon exports, the current account surplus narrowed ($10.5bn in Q4, 2014) and the capital and financial account recorded a deficit of $9.5bn in Q4, 2014 .

“We expect the current account surplus to shrink to $3.7bn in 2015 (4.6% of GDP) due to lower oil prices, before recovering slightly in 2016-17 in line with the recovery in oil prices,” the analysts said.

In months of prospective import cover, international reserves were stable at 7.5 months of imports, having risen to $42bn in June 2015 from $41.8bn in May. QNB expects the accumulation of international reserves to continue, reaching $46bn, or eight months of import cover, at end-2015.

Bank deposits year-on-year growth accelerated to 8.9% in June 2015 from 7.7% in May. Public sector deposits contracted by 5.9% year-on-year in June while private sector deposits grew by 10.1%. Non-resident deposits doubled, growing by 104.5%. “We expect double-digit deposit growth of 11.3% in 2015 reflecting strong population growth,” the report said.

Strong lending drove bank assets growth which accelerated to 11.2% in June from 7.9% in May. Credit expansion grew foreign assets by 9.3% year-on-year, while domestic assets grew by 11.4%, driven mainly by the growth in domestic credit (11.6%). Bank assets are expected to rise by 10% in 2015, increasingly driven by project lending.

The analysts forecast project lending to grow 9% in 2015, “increasingly driven by project lending and the expanding population; as a result the loan to deposit ratio is expected to decline gradually to reach 106.5% in 2015”.
The overall loan book rose to 13.4% year-on-year in June from 11.6% in May. Public sector lending contracted by 7% year–on-year while lending to the private and foreign sectors grew strongly by 25.7% and 31.7% respectively.
An increase in government capital spending drove investment share in GDP, which rose to 32.4% in 2014 from 28.6% in 2013; however the share of exports declined with lower oil prices. Nominal GDP grew by 4.1% in 2014, down from 6.15 in 2013, due to the drop in oil prices.

QNB expects the shares of private consumption and investment to increase on the back of high population growth and strong government investments; while lower expected oil prices in 2015 should reduce the share of exports, before bouncing back in 2016.

Qatar’s population grew by 10.4% year-on-year in July 2015 to reach 2.12 million. Male population rose 11.2% year-on-year, reaching 1.7 million in July while the female population increased by 7.6% year-on-year over the same period, reaching 0.46 million.

QNB expects Qatar’s ongoing investment programme to continue to attract expatriates, resulting in overall population growth of 7% in 2015.

“We expect inflation to pick up as the growing population is projected to push up domestic inflation, offsetting slower foreign inflation. Inflation rose to 1.4% in June (0.9% in May),” it said. QNB projects interbank rates to rise with the expected hike in the US policy rates, which is likely to take place later this year.

Citing Qatar Central Bank (QCB) data, QNB said the real estate price index reached its highest point in June 2015 since its introduction four years ago. QNB expects real estate prices to continue their strong growth although at a more moderate pace on strong population growth and higher per capita GDP, reports The Peninsula.

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