Qatar’s economic activity gaining steam in Q3 2021

Satyendra Pathak Doha Qatar’s economic activity appears to be gaining steam in the third quarter of this year, thanks to the progressive easing of COVID-...

Satyendra Pathak Doha Qatar’s economic activity appears to be gaining steam in the third quarter of this year, thanks to the progressive easing of COVID-19 restrictions from late May amid a rapid vaccination campaign with the PMI marking an 11-month high in July, FocusEconomics has said in its monthly report released on Tuesday.According to FocusEconomics Consensus Forecast-Middle East & North Africa for September report, Qatar’s economy should return to growth this year as foreign demand strengthens and looser restrictions at home aid domestic activity. “Investment in the energy sector and easing tensions with Gulf neighbours should also provide support. However, the potential snapback of restrictions amid new variants of COVID-19 poses a downside risk,” the report said.“After shrinking in annual terms in the first quarter of 2021, the economy’s year-on-year performance likely improved in the second quarter on a favourable base effect. However, underlying momentum in the non-energy sector was constrained by tougher COVID-19 restrictions early in the quarter, as suggested by falling PMI readings in April and May,” it said.Meanwhile, the report said, signs from the energy sector were mixed, with mining and quarrying output falling sharply in June after expansions in April and May. “In other news, Qatar and Saudi Arabia recently established a coordination council and Qatar appointed an ambassador to Saudi Arabia, pointing to the ongoing thawing of relations between the two nations following years of tensions,” the report said.FocusEconomics panelists see a 2.7 percent rise in GDP in 2021, which is unchanged from last month’s forecast, before growth of 3.9 percent in 2022.Inflation in Qatar rose to 3.1 percent in July from 2 percent in June. Price pressures should be notably higher this year than last due to higher food and energy costs, recovering activity and a supportive base effect. “The possible implementation of a VAT is an upside risk to prices going forward. Our panelists see consumer prices rising 1.5 percent in 2021, which is up 0.1 percentage points from last month’s forecast. In 2022, our panel sees inflation averaging 2.4 percent,” the report said.According to the annual data released as part of the report, the overnight lending rate in the country would continue to rise from the current level of 2.5 percent and reach up to 4.07 percent by 2025.The Qatari riyal will continue to be pegged at $3.64 in the years to come, the report said.The country would witness a sustained increase in both imports and exports in the coming years. While the merchandise exports from the country are expected to rise from $69.5 billion in 2021 to $91.4 billion in 2025, the report said, merchandise imports would increase from $28 billion in 2021 to $36.3 billion in 2025.FocusEconomics, a leading provider of economic analysis, has also forecast that Qatar’s trade balance would rise from $41.4 billion in 2021 to $55.1 billion in 2025.The report has projected that Qatar’s current account balance will account for 5.2 percent of the total GDP in 2021. The percentage of the current account balance would rise to 8 percent in 2025, the report said.Qatar’s current account balance is expected to turn positive and reach $5.2 billion in 2021, the report said, adding that it will continue to remain in the positive territory for the next four years and reach up to $16.2 billion in 2025.