Published On: Sun, Nov 9th, 2014

Lower Oil Prices ‘Will Not Impact’ Qatar’s Growth Plans

Qatar, petroleum refinery

Qatar, petroleum refinery

Qatar’s large infrastructure investment plans would be sustainable, even if oil prices fell considerably, says a QNB Group report released here Saturday.
Falling oil prices raise speculation on its impact on hydrocarbon exporting countries. Brent crude oil prices dropped from a peak of US $115 a barrel in June 2014 to US $ 82 currently.
Oil prices would have to fall a lot to impact Qatar’s infrastructure investment plans, the QNB Group report says.
“This assessment pegs on fiscal break-even prices – oil prices that keep government budget in balance – estimated to be well below current oil prices,” says the report.
Currently, large projects chug on in Qatar. Recently a US $182 Billion project took off outside oil and gas. The largest projects include major real estate developments, a new metro and rail network, new roads and highways.
These major projects are creating many jobs. The population has grown at an annual average of 9.2% in the first ten months of 2014.
The QNB Group report expects this to spur non-hydrocarbon GDP growth. This supports Qatar’s move to diversify its economy.
Revenue from oil and gas exports will help finance infrastructure development, says the report and adds, fiscal and current account surpluses of 15.6% and 30.9% of GDP respectively in 2013 give ample resources.
How low oil prices need to fall to push the fiscal balance into deficit and force the state to cut back its investment plans? The report says, “Based on 2013 data, we estimate the fiscal break-even price – the oil price at which government spending would equal government revenue – at US $67 per barrel.” The report says its estimates are based on the impact of a change in oil prices while everything else remains constant, such as hydrocarbon production, with the exception of gas prices, which “we assume fall in line with oil prices.
“Even if oil prices did fall below US $67 per barrel, they would have to remain depressed for some time to have an impact on the investment plans.Qatar has resources to draw on before it is forced to trim domestic investment.
“However, should oil prices remain low for long; a prioritisation process is likely to ensure completion of key projects.
“Even though oil prices have fallen almost 30% since their June highs, Qatar retains the capacity to finance its infrastructure investment programme.” The QNB Group report ends saying,”strong economic growth will continue, driven by infrastructure investment programme”.

Source : Qatar News Agency

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