Economic Trends Shaping Qatar and Saudi Arabia

  • ID: 3726997
  • Report
  • Region: Qatar, Saudi Arabia
  • 39 Pages
  • Frost & Sullivan
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An Evaluation of Growth Opportunities Amidst Risks of Falling Oil Prices
Report scope: Economic, Fiscal, and Industry Analysis

Geographic scope: Gulf Cooperation Council (GCC), Qatar, Saudi Arabia

What Makes Our Report Unique?

This report includes an impact analysis of plunging oil prices on GCC, Saudi Arabia and Qatar in particular, with coverage on fiscal readjustment strategies and economic diversification policies. The report also highlights non-hydrocarbon related growth opportunities across sectors such as construction, insurance, and airports that investors could look to pursue amidst oil price disruptions.

Key Questions Answered

- How are Qatar and Saudi Arabia fiscally re-strategizing, and what are the implications of the same?

- What is the progress on economic diversification away from oil and gas, and what are the government policies for the same?

- What are some of the non-hydrocarbon related growth opportunities?

Key Findings:

- GCC Growth Outlook: Sliding oil prices are acting as a drag on the growth of all GCC countries, with the region’s growth expected to slow down from X% in 2015 to % in 2016.

- Oil Price Slide and GCC: The dependence on oil varies among GCC countries, with oil revenues for instance accounting for as high as X% and X% of central government revenues in Kuwait and Saudi Arabia respectively in 2013. The fall in oil prices has negatively affected GCC’s export revenues and fiscal balance.

- GCC Fiscal Outlook: GCC countries have been sliding into fiscal deficits as a result of falling export revenues. As part of fiscal readjustment strategies, countries are pursuing subsidy cuts, curbing other expenditure ,and all GCC countries are expected to introduce a value added tax (VAT)of X% by 2019.

- Economy: Non-hydrocarbon sector growth and new gas production are expected to help make Qatar the fastest growing GCC country in 2016.Growth is expected to slow by 2020 with the narrowing of infrastructure investments. Qatar had the third-highest GDP per capita globally at $X.

- Government Revenues and Expenditure: Reliance on oil revenues has declined over the past decade, with an increasing reliance on gas revenues. Sliding oil prices have affected both oil and gas revenues.

- Qatar has projected a 2016 fiscal deficit, a first in years. Expenditure and revenue are projected to decline by X% and X% respectively compared to the 2014/15 budget.

- Economic Diversification: The share of non-mining and quarrying in Qatar’s GDP has grown from X% in 2004 to X% in 2014, and the non-mining and quarrying sector has been growing at double-digit rates in the recent past. Policies for greater diversification envisage infrastructure development, the development of alternative industries which rely on hydrocarbon feedstock.

- Infrastructure Boom: Qatar is witnessing significant infrastructure development in preparation of the 2022 FIFA World Cup and as part of diversification efforts. The Hamad International airport was opened in 2014. Among major on-going projects are the $X billion Doha Metro and $X billion New Port Project.

- Growing Insurance Industry: Gross written premium of the national insurance companies grew from $X million in 2010 to $X million in 2014. There is good scope for insurance growth with ongoing construction activity, low present penetration rate, and the suspension of national health services

- Natural Gas Industry Outlook: With a moratorium imposed on new projects in the North Field in 2005, production growth has been declining in recent years. Production from the Barzan field, the last approved project before moratorium, is expected to start in 2016. The full production capacity of X of billion cubic feet per day is expected to be reached by 2017.

- Economy: Cuts to government spending are expected to restrain growth to X% in 2016, given the dependency of the non-oil private sector on government contracts. Increased privatization is being considered by the government sectors such as airports and telecom to increase efficiency and reduce the fiscal burden.

- Budget Analysis: 2016 expenditure and revenue is expected to contract by X% and X% respectively in comparison to 2015 actuals.Subsidies to fuel, power, and water were pursued by 2015 end, with further cuts expected in the next years.

- Economic Diversification: The share of the non-oil sector in Saudi Arabia’s GDP has grown from X% to X% during 2004- 2013. In 2014, the oil sector grew by only X%, whereas the non-oil sector grew by X%. Policies for greater economic diversification include the setting up of a $X trillion wealth fund and the construction of 4 economic cities.

- Privatization of Airports: All of Saudi Arabia’s airports are expected to be privatized by 2020. Interested foreign investors can take part in the privatization process without the need to partner locally- a requirement in most industries.

- Industrial Clusters Program: Five export-oriented industries which can capitalize on resource advantages comprise automotive, metals and minerals processing, solar energy products, plastics and packaging, and pharma and biotech. Special teams for each industries assist investors in the entry process.

- Oil Industry Outlook: In the present situation of excess supply and sliding prices, Saudi Arabia is not expected to cut back production to help balance prices, but will instead be relying on market forces. A freeze on production is also not imminent following the failure of recent Doha talks.
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1. Executive Summary

2. GCC- A Macroeconomic Outlook
  • Impact of Falling Oil Prices on GCC
  • Growth Outlook
  • Fiscal Outlook
3. Qatar in Focus
  • Country Snapshot
  • Government Revenue and Expenditure
  • Progress in Economic Diversification
  • Policies for Greater Economic Diversification
  • Infrastructure Boom
  • Growing Insurance Industry
  • Natural Gas Industry Outlook
4. Saudi Arabia in Focus
  • Country Snapshot
  • Budget Analysis
  • Progress on Economic Diversification
  • Policies for Greater Economic Diversification
  • Privatization of Airports
  • Industrial Clusters Program
  • Oil Industry Outlook
5. Key Predictions
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