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Qatar is forecast to post a “strong growth rebound” with LNG demand in South and East Asia underpinning medium-term prospects, World Bank said in its Gulf Economic Update (GEU).
Qatar’s economy is projected to grow by 3% in 2021 before accelerating to 4.1% in 2022 and 4.5% in 2023, World Bank said.
Following a year of economic distress, Gulf Co-operation Council (GCC) economies are expected to return to an aggregate growth of 2.2% in 2021, World Bank said.
This growth is buoyed by the global economic recovery, projected at 5.6% and the revival of global oil demand and international oil prices.
The Covid-19 pandemic and the decline in global oil demand and prices dealt the GCC countries a health crisis and a commodity market shock causing a GDP contraction 4.8% in 2020.
Fiscal deficits are projected to persist for most over the forecast period, however. The three countries with the largest deficits in 2020 – Kuwait, Bahrain, and Oman – are projected to remain in deficit throughout 2021-23, but at narrower ratios to GDP in 2023 than during the economic downturn in 2020.
According to the GEU, the oil supply cutbacks and the four-year-low average oil price of $41.30 per barrel slashed the group’s goods and services exports by 8.1% in real terms and turned the current account surplus of 6.8% of GDP in 2019 into a deficit of 2.9% of GDP in 2020.
Non-oil GDP is proportionately larger now in all the GCC countries than it was 10 or 20 years ago, but much work remains to be done.
Many are still highly reliant on oil and gas exports, which remain over 70% of total goods exports in Kuwait, Qatar, Saudi Arabia and Oman, and on oil revenues, which exceed 70% of total government revenues in Kuwait, Qatar, Oman, and Bahrain.
“While the GCC has done a lot in the last year to contain the effects of the pandemic on their economy, including procuring vaccinations early on, they must continue to reform their public sector finances,” said Issam Abousleiman, World Bank regional director of the GCC Countries.
“The region needs to strengthen their competition policies to harness the benefits of telecommunications and the digitalisation of economic activity.”
The sixth issue of the GEU focuses on fiscal revenues and structural reforms including strategic investments in digitalisation and telecommunications, which can help enable more economic diversification.
Promoting private sector development remains at the core of national and regional economic diversification efforts.
The GCC managed to complete only two state-owned enterprise privatisation transactions and only two public-private partnership (PPP) agreements in 2020, but it was a difficult year for commerce and investment anywhere, World Bank noted.
Also, advancing the telecommunications frontier is a strategic investment sector for diversification and post Covid-19 recovery that will serve the GCC well.
Past investments in the sector accorded the GCC sizeable benefits during the pandemic as quarantines, lockdowns, and restrictions forced public health surveillance, wholesale and retail commerce, public and private education, banking and financial services, and private and government office work onto digital channels,
Strategic investment in advanced telecommunications technologies, including 5G, is underway in the GCC, according to the GEU.
“But beyond capital spending on infrastructure, the telecommunications sector would benefit greatly from improvements in the legal, regulatory, and competition frameworks under which service providers operate,” the World Bank said.
