JEDDAH: Qatar's economy is set to expand by more than 19 percent in 2011 following a surge in the country's gas production and public spending, the Saudi American Bank Group (Samba) said in its monthly economic bulletin. It grew by around 16 percent in 2010 from only 8.7 percent rate recorded in 2009, when oil prices plunged by nearly $30 a barrel over the previous year, the report said. As this developed, Qatar's 20-stock benchmark gained 2.56 percent, or 209 points Sunday, to a week high of 8,395.02 points. Market capitalization surged 1.95 percent or more than QR8 billion to QR427.42 billion mainly on large and micro cap equities, which gained 2.40 percent and 2 percent, respectively. Foreign institutions were increasingly bullish as their net buying shot up to 15.44 percent Sunday from 6.97 percent in the previous day. The country's nominal GDP is forecast to grow 22.4 percent to $149.7 billion in 2011 from $122.3 billion in 2010 due to higher oil prices and LNG output. "Qatar's economy continues to thrive as growing hydrocarbon revenues support robust public spending which has helped revive private sector activity. The hydrocarbons sector continued to lead the way growing by nearly 36 percent in the third quarter on the back of higher oil prices and production," the report said. Moreover, the construction sector rebounded 1.9 percent after steady declines in 2009 and the first half of 2010 amid public investment spending. "With the 2022 World Cup in mind, we can expect greater impetus for the implementation of already planned infrastructure projects, particularly in transportation, which should ensure a steady stream of activity," it said. "On top of this will be investment in new stadia and hotel facilities, but these are unlikely to materialize for a while yet, given that the event is 12 years away," it added. Meanwhile, short-term growth rates will remain high reflecting new LNG and GTL production, as well as robust public spending, with real GDP expected to accelerate to around 19.6 percent in 2011. The report projected the country's current account surplus to rise to 28.2 percent in 2011 from 21.2 percent in 2010. Yet, fiscal balance slipped from 9.4 percent to 8.7 percent due to high spending and GDP growth, but anticipating the rate to rise to 9.5 percent this year. Inflation though would increase, but ruled out a return to double-digit rates recorded through 2008. Average food price inflation accelerated slightly from 1.3 to 2.3 percent, while increases in most other components of the consumer price index ranged from 2-4.5 percent. "Inflation is beginning to pick up as domestic demand revives and international commodity prices rise…the year-on-year increase in food prices topped four per cent in December – but we do not expect a return to the double digit levels seen in 2007-2008. Although the real estate sector is likely to begin stabilizing during 2011, there is unlikely to be any significant pressures from rents," the report noted. "This will help contain the overall increase in the CPI despite some modest acceleration in other components, including the relatively heavily weighted food element which accounts for around 13 percent …. overall we project that average inflation will rise only modestly to three percent in 2011."
