QNB Group raises 2012 GDP growth estimate due to Q3 data

Posted on : Sun, 06 Jan 2013

QNB Group has revised its forecasts for Qatar’s GDP growth in 2012-13. The new forecasts take into account Q3 2102 GDP data, released last week by Qatar Statistics Authority, as well as a slight downwards revision in oil price forecasts.

The Q3 GDP data was broadly in line with QNB Group’s overall expectations, albeit slightly weaker in the oil and gas sector and stronger in the non-oil sector. As a result, QNB Group has revised up its estimate for overall real GDP growth in 2012 to 6.1%, from 5.6% previously, and revised its 2013 forecast down marginally to 5.0%.
The volume of activity in the oil & gas sector, as represented by real GDP, grew by 0.6% during Q3 2012. The increase came despite a slight easing in crude oil production, by about 11,000 barrels per day (b/d), and scheduled maintenance work on some of Qatargas’s LNG trains in September, which would have reduced LNG production.

The real increase is, therefore, most probably due to higher gas-to-liquids (GTL) production as the second Pearl train ramped up and required greater gas feedstock from the North Field. This would also help to partly explain the 4.7% quarterly increase in manufacturing sector real GDP, where the value-added by the GTL process is categorised.

QNB Group expects that there was a pickup in oil & gas GDP in the final quarter of 2012. This is because of an expected increase in crude production and the ending of most of the LNG maintenance downtime (although one train was offline in October). In addition, Pearl GTL is expected to have approached close to its full capacity of 140,000 b/d during Q4, therefore further increasing its gas draw and also the amount of condensates extracted from the wet gas.

Nonetheless, because Q3 GDP was lower than expected, QNB Group has revised down slightly its estimates for full year real GDP growth in the oil & gas sector to 2.1%.
Conversely, the non-oil sector performed better than expected in Q3, which has led QNB Group to revise up its full year non-oil real growth estimate to 9.4%, from 8.0%. Although the non-oil growth rate decelerated in both quarter-on-quarter and year-on-year terms in Q3, after a particularly strong first half of the year, it did so less than had been expected. In particular, manufacturing, trade & hospitality and government services all performed above expectations. Nominal non-oil growth, meanwhile, was slightly below expectations, suggesting downwards pressure on prices in some sectors.

Looking ahead to 2013, oil & gas growth is forecast to pick up marginally, to 2.8%, owing to higher oil and LNG output and a full year of Pearl GTL operating near its rated production capacity. Nominal growth in the sector is expected to be flat in 2013 because average oil prices are forecast to ease to US$108 in 2013, compared to US$111 in 2012. However, oil price volatility makes it more difficult to accurately forecast prices and the correspondingly nominal GDP. The real GDP growth, by contrast, is less subject to the oil-market volatility, and would only differ substantially from the forecast if there were unforeseen production problems in some part of the sector or a very substantial fall in prices that led to production cuts.

Meanwhile, the non-oil sector is forecast to achieve about 6.6% in real growth in 2013, led by a buoyant construction sector as major infrastructure projects gather pace. The financial sector will also benefit from the resulting financing needs.

Overall, QNB Group forecasts that Qatar will achieve real growth of 5.0% in 2013. This slowdown has been long expected given the scheduled completion of all major oil & gas projects. With Pearl GTL fully operational, there will be no significant additions to production in the sector until the launch of the Barzan gas project, in 2014/15. Until then, only small increases in oil and LNG production will be possible through operational efficiency gains. However, Qatar’s non-oil growth rate remains high by both regional and international standards, and will drive the economy during the coming years.