First with Financial Comment from Arabia

Qatar economy risks overheating again as boom reignites

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Super high apartment rentals and soaring inflation could soon be back in Qatar whose economy barely batted an eyelid this year during the global financial crisis.

Landing in Doha the traffic and ubiquitous construction workers are an instant reminder that gas revenues are about to rocket next year making Qatar easily the fastest growing economy in the world, with official growth forecasts set at 16 per cent GDP growth and the Economist Intelligence Unit punting for a much higher 24.5 per cent.

New airport

Even before landing you can see the new airport under construction, rising from reclaimed land. It should be ready in 2011. Two weeks ago the site seemed very quiet but apparently a visit from the Emir himself has since speeded up progress.

Yesterday French contractor Bouygues was appointed main contractor for the new $1.6 billion Barwa Financial District in Doha with the first phase set for completion in 2013 (pictured above). The project includes nine office buildings of up to 52 storeys, a five star hotel and shopping centre.

Barwa is literally building on the success of the Qatar Financial Centre whose innovative advertising can hardly have been missed by anybody watching financial television. The QFC is open for business and Barwa is building for business.

Indeed, investors in search of the next stock market boom might turn their calculators to the Qatar Exchange, the revamped Doha Securities Market. Stocks have been flat-lining at the 7,000 level for the past few weeks, and do not really seem to be anticipating the boom years ahead.

Qatar Airways

For example, over at the Dubai Air Show yesterday Qatar Airways could proudly boast of being among the world’s fastest growing airlines. Qatar Airlines was only launched in 1997 but today has 72 aircraft and a further 220 on order valued at over $40 billion.

Powering up the Qatari economy is a huge expansion of gas exports next year as major new capacity comes on line. Gas is sold on long-term contracts and only a very severe global recession would begin to impact on this revenue.

In truth, the main danger for Qatar is that its economy risks overheating with a resurgence of the price inflation that appeared in 2007-8 at the height of the oil boom. And quite apart from the domestic boom having a currency linked to the US dollar is also going to spike prices higher again with interest rates far too low for a booming economy like Qatar.


Written by Peter Cooper

November 17, 2009 at 9:21 am

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