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The local economy should be given time to catch up with the significant investments needed to implement gigaprojects, Finance Minister Mohamed Al Jadaan said at the Qatar Economic Forum yesterday, according to Bloomberg. The government should be cautious about “overheating” the economy, Al Jadaan said, using the same term as Economy and Planning Minister Faisal Alibrahim last month to provide assurances on the economy’s capacity to fund projects.
In his words: “If you don’t allow your economy to catch up with your projects, basically what will happen is you’ll import a lot more,” Al Jadaan said, warning that overheating the economy could lead inflation to accelerate and result in what he called “economic leakage,” suggesting that pushing ahead with the projects without the domestic capacity to support implementation would end up incurring higher costs. “So giving it more time is actually wise,” he said.
IN CONTEXT- Officials have lately hammered the idea of preventing the economy from overheating on the back of its economic diversification push. It coincides with reports of a slower buildout of Neom, which drove officials at the project to assure contractors and bankers that the buildout of the city was proceeding on schedule. Neom also recently came off the road in China with officials looking to rally interest from Hong Kong, Beijing, and Shanghai. It is looking to diversify its funding sources away from PIF, securing a fresh revolving credit facility worth SAR 10 bn from local banks and reportedly planning what could be its first-ever sukuk sale.
Al Jadaan first alluded to this view on allowing the economy to catch up with the government’s projects in December, when he hinted that the government could strategically slow down the execution of some of its economic transformation projects, meaning some could wrap past their initial 2030 deadlines. “Certain projects can be expanded for three years — so it’s 2033 — some will be expanded to 2035, some will be expanded even beyond that and some will be rationalized,” Al Jadaan said late last year.
SOUND SMART- Officials don’t want government borrowing to soak up liquidity the private sector needs to grow. Access to debt for both private companies and citizens is key to growth, Al Jadaan said, noting that the government has no interest in crowding out the private sector. Policymakers have also considered the delay in terms of how much international debt the Kingdom wants to take on, emphasizing the need to stay below a sustainable debt ceiling measured against both GDP and non-oil GDP, the minister added.
REMEMBER- The Kingdom reported its sixth consecutive quarter with a budget deficit, posting a deficit of SAR 12.4 bn in the first quarter of 2024 — four times higher than its shortfall in 1Q 2023. Officials had accepted that they may have to accept modest fiscal deficits as the price of pursuing growth.
A wave of optimism: Al Jadaan said he was positive on plans remaining on track despite higher spending to implement projects. “We are very conservative in our projections and therefore our plans on how the oil revenue will cover that expenditure,” he said.
