INTERNATIONAL - Qatar’s economy looks far from top form as it wraps up a flurry of building projects for the 2022 soccer World Cup.
Now that rents are falling and much of stadium construction draws to a close, the toll is starting to wear on the $192 billion economy. Output excluding oil and gas extraction shrank for the first time since records began in 2012, dropping an annual 1.1% in the second quarter, according to Qatar’s Planning and Statistics Authority.
Construction, manufacturing, as well as wholesale and retail, are all in contraction, figures released Tuesday showed. Overall, the economy of the world’s largest exporter of liquefied-natural gas shrank 1.4% from a year earlier.
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“The latest numbers are showing that the World Cup-led construction boom in Qatar is nearing the end. The country will need to find other drivers for growth. It will likely fall back on the development of its vast natural gas reserves.” --Ziad Daoud, Mideast economist.
For years, Qatar’s economy sped forward, propelled by $200 billion of infrastructure works to prepare for the world’s most watched sporting event. Alongside other efforts to diversify away from oil and gas, brisk construction and high property prices kept the tractors rolling.
But two in eight of the stadiums to host the World Cup have already been built, with the rest slated for completion by the end of next year. Qatar’s new metro system is also operational after some of its first line opened earlier this year.
- Construction shrank an annual 3.5% in the second quarter, only its second decline since the data series began
- Wholesale and retail dropped 1.2% from a year earlier
- On a quarterly basis, manufacturing, real estate and finance all grew in April-June
“Overall, the economy was relatively stable versus the previous quarter,” said Akber Khan, the senior director of asset management at Al Rayan Investment in Doha.
A projected expansion of the country’s LNG facilities also bodes well for Qatar’s prospects, since the increase in capacity could generate $40 billion in additional export revenue.
Still, the economic buzz surrounding the World Cup is fizzling out. What’s more, fewer tourists and less business from the country’s neighbors have slowly inflicted a cost since mid-2017, when Saudi Arabia, the United Arab Emirates, Bahrain and Egypt abruptly cut ties and halted most travel to the tiny peninsular country in the Gulf.
People celebrate in front of a screen that reads "Congratulations Qatar" after FIFA announced that Qatar will be host of the 2022 World Cup in Souq Waqif in Doha.
Demographics is another factor. Population growth, already slowing when the embargo began, has slackened. In 2018 it grew by only 1.3% to 2.8 million.
“There is little to make us positive about the outlook in the remainder of the year,” said Maya Senussi, senior economist at Oxford Economics. “The primary concern is one of oversupply as capacity comes online ahead of World Cup 2022.”
Awarding the 2022 World Cup to Qatar may well have been "a mistake", Fifa president Sepp Blatter said for the first time. Picture: Karim Jaafar