Boston, MA -- (SBWire) -- 08/09/2013 --Qatar's short-term political risk profile remains among the most stable in the region. Despite enjoying little in the way of democratic freedom, Qataris benefit from massive hydrocarbon wealth which is spread generously across the country's native population and enjoy the highest per capita GDP in the world. A small population - and one without much inclination to protest against the government - will keep the country insulated from large-scale public unrest in the immediate term.
Qatar's economic growth will be largely driven by the non-hydrocarbon sector over 2013, with expanding domestic consumption and progress on infrastructure investments fuelling economic activity. However, weaker performance in the hydrocarbon sector will drag down overall growth, and we expect Qatar's real GDP to expand by 5.0% in 2013, down from 6.2% in 2012 and a yearly average of 15.6% during 2007-11.
We hold to our 2013 average inflation forecast of 3.5%, from 1.9% in 2012. The main driver of the headline inflation figure continues to be a rebound in rental rates, following years of deflation. However, we expect a moderation in rental inflation in the second half of the year, owing to base effects and a still uncertain demand-supply picture in the real estate market.
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Key Risks To Outlook
Given the economy's heavy reliance on the hydrocarbon sector, a pronounced global economic downturn - if it were to translate into a sustained drop-off in demand for oil and gas - could impact negatively on our forecasts for Qatar's external account position, budget and growth outlook. That said, we highlight that the country's US$115bn sovereign wealth fund - as well as its continuing ability to tap international debt markets - provides the economy with significant bulwarks against these risks.
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