DOHA: Qatar has been able to ride out the ‘blockade impact’ on its economy better than expected, Arqaam Capital Research noted in its ‘Mena Banks Outlook.’ In its latest research note, Arqaam Capital said it has added QNB to its core portfolio. It had already upgraded QNB stock to a Buy from Hold following the bank’s strong Q3 17 performance.
Qatar’s latest GDP data shows 3.6 percent year-on-year expansion, while latest trade data also shows resilience, with imports in particular now higher than pre-blockade levels having risen by 11.5 percent year-on-year in October, after dipping over 30 percent in June and July.
The 2018 Qatar budget should provide further support as it pencils in 16 percent higher spending, while Arqaam calculates a 3.7 percent fiscal surplus at $65/barrel (bl) oil price. According to Arqaam, the Barzan gas facility is likely to further raise the oil and gas sector’s output by 11bn standard cubic feet/day.
Qatari Riyal is stabilising after it moved away from the peg towards the latter part of the year. Foreign outflows have already slowed down significantly, with continued deposit outflows from foreign sources offset by higher borrowing from foreign banks and cheaper funding from the PSE sector.
Qatar’s budget for 2018 expects $55.4bn in spending vs. $ 47.7bn budgeted for 2017 (+16.1 percent y/y) and with $ 25bn of the spending earmarked for major projects (45 percent of total spend). The budget assumes an oil price of $45/bl.
However, even at an oil price of $ 55/bl, Qatar would have a c.1.6 percent fiscal surplus, on Arqaam’s numbers, going up to even c.3.7 percent at a $65/bl oil price. The Qatari government did mention in the budget that it is looking to boost its non-oil revenues.
Qatar Riyal moved away from the QR 3.64/USD peg late 2017 in the offshore markets, but it was eventually brought back to the peg by the Qatari authorities. “In our view, the combination of FX reserves and the very large SWF holding international assets, should allow Qatar to defend the peg relatively easily in 2018 and are therefore not concerned.
On QNB Group’s performance, Arqaam added: “ Finansbank growth has been remarkable, increasing earnings by +39 percent y/y (+70 percent in LCY terms), driven by loan growth of 11 percent (+32 percent LCY). Arqaam expects the consolidated net profit of GCC banks to increase 0.7 percent in 2017 and 8.7 percent in 2018, after having fallen 3.6 percent in 2016.
