Boston, MA -- (SBWIRE) -- 05/22/2013 -- Core Views

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 that 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 in 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 an estimated 6.0% in 2012 and from the yearly average of 15.6% during 2007-2011.

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Major Forecast Changes

We expect Qatar's current account balance to narrow gradually over the next few years. Placid growth in the hydrocarbon sector and softer global energy prices are likely to lead to a persistent fall in export income over the medium term, while import spending on goods and services will continue to expand as a result of strong economic growth and an infrastructure boom. We forecast a current account surplus of QAR168.5bn (US$46.3bn, equivalent to 22.9% of GDP) in 2013 - down from an estimated 29.0% of GDP in 2012.

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$100bn 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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