By Pratap John/Chief Business Reporter


Despite a significant increase in spending, Qatar’s fiscal position remains “strong” with a projected surplus of 3.9% of the country’s GDP in 2013-14, a new report has shown.
A testament to the buoyancy of Qatar’s hydrocarbons earnings is seen in the fact that capital spending can double compared with the 2012 outlay and a budget surplus still be in prospect, said Samba Financial Group in its latest economic monitor.
In 2012, Qatar’s capital expenditure of $13.7bn left a surplus of $22.3bn, it said.
Qatar’s capital spending is likely to have grown well above budget as the authorities look to make up for lost time on the infrastructure front. In recent years, disbursements on capital spending have consistently undershot budgeted spending, a situation that is set to change this year as the 2022 FIFA World Cup looms ever larger, the report said.
A key component of the National Development Strategy (NDS) is to reduce the budget’s dependence on oil and gas exports, notwithstanding the fact that its gas reserves will last for at least a further 150 years at historical rates of extraction, Samba said.
Indeed, there has been good progress on this front with a solid rise in investment income, (60% increase in 2012-13), which includes corporate and business income tax and other revenue streams.
Although a part of this increase is explained by a change in accounting practices (and the small base), it is certainly an encouraging trend.
The government’s objective is to finance its entire budgetary operations through non-hydrocarbon revenue by 2020. Though Qatar is still some way off this objective (Samba forecasts the non-oil deficit to be 17% of GDP in 2013), the International Monetary Fund believes Qatar is the only Gulf country currently running a non-oil fiscal deficit consistent with an ‘equitable intergenerational allocation of its oil revenues’.
Specific fiscal targets aside, Qatar was the first of the Gulf Co-operation Council (GCC) nations to set up a medium-term budgetary framework with the aim of giving its spending some predictability and tying the budget to its extensive development plans.
The pattern in the GCC is that medium-term development plans tend to be undermined by fiscal laxity and ad hoc spending decisions.
According to Samba, Qatar’s nominal GDP may scale up to $211.4bn in 2014 and $219.9bn in 2015 with a real GDP growth of 5.6% and 5.8% respectively.
Preliminary estimates from the Qatar Statistics Authority show that real GDP growth reached 6% in the second quarter of 2013, following 6.1% in the first. Akin to 2012, the bulk of the growth can be attributed to the non-hydrocarbon sector, which grew at 9.9% in the second quarter following 10.6% growth in the first quarter.