S&P: Qatar's Growth to Gain Momentum from 2025 on LNG Expansion

Qatar will gain growth momentum from 2025 as capital spending remains strong and hydrocarbon production increases due to the North Field Expansion (NFE), with liquefied natural gas (LNG) production capacity expected to jump 60% by 2027 from current levels, according to Standard & Poor's (S&P), a global credit rating agency. Expecting Qatar to remain one of the largest exporters of LNG globally; it said between 2025 and 2027, the government plans to increase Qatar’s annual LNG production capacity to 126 million tons from 77 million. "The strategic pivot away from Russian gas, particularly by European economies, suggests there will likely be demand for additional exports from Qatar. In our forecast, we assume that LNG production levels will be largely flat until 2025, but increase about 30% over 2026-27, given our forecast that the full increase in capacity will take some time to materialize," the report said. S&P said demand for LNG is likely to peak in the mid-2030s, with increasing use of renewables in the energy market having a gradual impact on hydrocarbons demand; nevertheless as a low-cost supplier, “we think Qatar will remain in a relatively strong competitive position even after 2030.”

Highlighting that Qatar's income levels are among the highest of all rated sovereigns; S&P forecast GDP (gross domestic product) per capita of US$82,600 in 2023, the 10th highest level of all sovereigns it rates. "Once the NFE project boosts LNG production after 2025, we expect income levels to further increase," it said, forecasting that Qatar will maintain "sizeable" external and fiscal net asset positions through 2026. "We expect the current account surplus to average close to 20% of GDP annually over 2023-26 with the net international investment position continuing to strengthen from an estimated 70% of GDP in 2022," it said. S&P considers the government's large liquid assets will average 140% of GDP over 2023-26, provide it with a strong buffer to mitigate the economic effects of external or financial shocks. Qatar derives about 40% of its GDP, 80% of government revenue, and 90% of exports from the hydrocarbon sector. Forecasting that the Brent oil price will average about US$90 per barrel in 2023 and US$85 thereafter; it said with hydrocarbon production and its price assumptions largely flat until the former begins to pick-up in 2026, "we expect the general government surplus to remain at about 4% of GDP over the period."

Expecting government expenditure to remain broadly flat at about 25% of GDP on average over 2022-25: S&P said "our expectation of additional expenditure restraint over the forecast period through 2025 largely relates to our assumption that government spending on capital projects, of about 10% of GDP in 2022, will decline to about 6% by 2026." With hydrocarbon sector output largely flat over the period to 2025, headline GDP growth will mostly relate to the performance of the non-hydrocarbon sector. "We anticipate a deceleration in economic activity this year as growth in non-hydrocarbon sectors, such as tourism, transport, and construction, slows after Qatar's hosting of the World Cup in late 2022," it said, forecasting real GDP growth to accelerate to nearly 4% by 2027 as gas production levels increase and the non-hydrocarbon sector remains relatively strong.