Qatar Inc appears to be less optimistic in the third quarter (Q3) of this year, mainly driven by weak sentiment in the non-oil sector in view of current global economic uncertainties due to the European debt crisis, rising inflation and disappointing employment numbers, according to Business Optimism Index (BOI).
Although the outlook is positive for the Qatar hydrocarbon sector due to robust oil demand, the non-oil sector – which includes manufacturing, construction, trade and hospitality, transport and communications and finance, real estate and business services – is less optimistic as they are “cautious” due to global growth concerns in the short-term, it said.
The BOI, a joint product of Qatar Financial Centre Authority (QFCA) and Dun and Bradstreet (D&B), was released yesterday by Yousef al-Jaida, Director, Strategic Development (Banking and Asset Management), QFCA.
“These findings reflect the expected quarterly retrenchment for the non-hydrocarbon sector growth in Qatar primarily due to the current global economic uncertainties. At the same time they also show the well documented continued strength of the oil and gas sector, forecast by the IMF to grow 29.5% in 2011 on the back of a 22.7% real growth in 2010,” al-Jaida said.
The overall BOI composite score for the hydrocarbon sector increased to 22 points against one in the previous quarter with 62% of the respondents viewing that selling prices will remain at the current levels in Q3, 28% said they expect prices for firm up while only 10% predicted a fall.
The net profit expectations and the level of employment have also registered an increase, reflecting the buoyancy in the hydrocarbon sector. “The 21 point gain in the hydrocarbon sector shows that businesses are optimistic that oil demand will remain robust and hence prices will remain steady or increase in the short-to-medium term,” Manjeet Chhabra, General Manager, D&B (South Asia and Middle East), said.
In the case of non-hydrocarbon sector, its composite index stood at 27, which is 15 points lower compared to the previous quarter. It is at a five-quarter low despite expectations of a 20% growth in real gross domestic product for 2011.
“Even though Qatar’s economy is mostly insulated from the regional unrest and weakness in global macroeconomic indicators, business sentiments have been dented by weak global cues,” he said.
The global economic is facing huge downside risks in terms of European debt crisis, overheating in the emerging economies, rising cost of commodities and disappointing unemployment numbers, he added.
Within the non-hydrocarbon sector, optimism has been declining in terms of sales volume, net profits, new orders, number of employees, level of stocks and selling prices. Despite the dip, optimism levels are still “robust”, he said, adding high oil prices and higher production in the natural gas sector will ensure budget and current account surpluses.
“As a result, Qatar will have plenty of fiscal room to implement ambitious expansion and development plans. Moreover, the Qatar National Development Strategy will provide a boost to the country’s non-hydrocarbon sector with spending at $125 for 2011-16,” he said.
Inflation in Qatar, according to BOI, is showing an upward trend mainly on robust global commodity prices, a weak dollar and increased government spending. Within the non-hydrocarbon segment, the outlook is rather less optimistic for Qatar’s manufacturing, construction, trade and hospitality, transport and communications and finance, real estate and business services sectors.
Al-Jaida and Chhabra at the release of the BOI Q3 report