Higher oil prices, which are up by more than one-third since the start of 2021, will narrow Qatar’s fiscal deficit to around 0.4% of GDP, reducing its need for external financing, Dun & Bradstreet has said in its short-term economic outlook.
Qatar’s 2021 budget is based on the conservative oil price assumption of $40/barrel, which is substantially lower than Dun & Bradstreet forecast of $56.2.
“A combination of higher oil prices and an estimated fiscal break-even oil price of $43.1/b mean that Qatar will likely post only a small deficit of around 0.4% this year, freeing up resources for higher investment spending, which could create opportunities in the construction sector.
“Qatar’s stronger fiscal position likely means that it will focus on paying down its sizeable external debt obligations. Qatar plans on repaying up to $10bn this year as part of a debt reduction plan, that will draw on cash reserves built up through surplus bond issuances over the last three years,” Dun & Bradstreet noted.
Meanwhile, the onset of a second wave of Covid-19 has prompted the government to impose new restrictions, including a ban on public and private gatherings. The new restrictions come as Qatar’s vaccine roll-out accelerates, with the country having administered enough vaccine doses to cover nearly 20% of the population.
“The impact on demand of the new restrictions will be somewhat offset by the onset of the holy month of Ramadan, which fuels higher consumption,” Dun & Bradstreet said.
In terms of ‘Business Environment Quality’, the researcher noted Qatar’s commercial risks are generally considered to be low and the country ranks a “respectable” 29th in the latest Global Competitiveness Report.
“The lifting of the blockade will see a further realignment of supply chains, cutting costs for businesses. It will also reboot tourist activity and ensuring the market access to the other member states via Qatar is strengthened.
“The coronavirus crisis has created a wide range of challenges to the trade and commercial environment globally, but Qatar is better placed than most countries to ride out the pandemic,” Dun & Bradstreet said.