DUBAI (Reuters) - A political crisis between Doha and its neighbors has pushed economists to cut growth forecasts for Qatar -- but not by enough to stop it being one of the region’s strongest performers, a Reuters poll showed.
The poll of 12 economists lowered the median forecast for Qatar’s gross domestic product growth this year to 2.3 percent from 3.5 percent projected in the previous Reuters poll, conducted in April.
Next year’s growth forecast was cut to 3.1 percent from 3.7 percent. If the new predictions are correct, Qatar will still grow more quickly this year and next year than most of the five other rich Gulf Arab oil exporters.
Last month’s decision by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to sever diplomatic and transport ties to Doha has caused many foreign banks to reduce business with Qatar, and forced it to arrange new shipping links through neutral countries such as Oman.
But Qatar’s ability to continue exporting natural gas, and its huge foreign exchange reserves, mean the sanctions are inconveniencing its economy rather than crippling it.
“We do not expect any systemic economic or financial shocks as things currently stand given Qatar’s strong foreign exchange position and ongoing hydrocarbon exports,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
She noted Qatari banks’ heavy dependence on foreign capital meant the crisis was pushing up interbank lending rates, however, and said higher import costs due to changes in shipping routes could also slow construction projects.
“A slowdown in project awards in the second half of 2017 could also filter into weaker investment activity in 2018 even in the event that the dispute is resolved.”
The poll predicts consumer price inflation in Qatar will barely change because of the sanctions, coming in at 2.4 percent this year, the same forecast as in the previous poll. Next year it is expected to be 3.0 percent; previously it had been forecast at 3.1 percent.
State finances are expected to weaken because of a pullback in global oil and gas prices in the past few months. Doha is now expected to run a budget deficit of 4.9 percent of GDP this year, not the 3.6 percent previously predicted, and 2.8 percent next year instead of 1.7 percent.
But the poll predicts Qatar will run a current account surplus this year and next. This year’s surplus is projected at 0.7 percent of GDP, instead of the 0.1 percent previously forecast, as slower economic growth limits imports of goods and services.
Elsewhere in the Gulf, the poll reduced the median forecast for GDP growth in Saudi Arabia this year to just 0.1 percent from 0.5 percent previously, but next year’s forecast rose to 1.9 percent from 1.8 percent.
In an effort to prop up oil prices, global producers decided in May to extend cuts in output by nine months to March 2018. Saudi Arabia is shouldering a large fraction of the cuts and this has been pushing down the GDP of its oil sector, although its non-oil economy has been faring somewhat better.
Polling by Shrutee Sarkar and Indradip Ghosh in Bengaluru; Editing by Catherine Evans