Qatar's growth slows down in 2016

Qatar's growth slows down in 2016
Qatar's growth slows down in 2016 | Courtesy of Shutterstock
As the gulf country of Qatar gets a look at first quarter numbers for 2016, officials are finding that the GDP rose in that time period by only 1.1 percent, much lower than the 2.7 percent growth in the last quarter of 2015.

A report on cites austerity measures as putting downward pressure on the national economy. It also quotes the Fitch ratings agency predicting slower growth in the country's non-oil economy, which the agency attributes to “a less benign fiscal environment.”

Another finding in the report shows that although the oil and gas industry within the country shrank 3 percent year over year, the non-oil economy grew 5.5 percent over the same time frame.

In terms of the big differences between the country's traditional oil economy and new efforts to diversify, Dr. Bruce Brunson, an assistant professor of economics at James Madison University, believes that some of the numbers can be a bit misleading.

“You have something that begins with a low base, and its growth rate is higher,” Brunton told Gulf News Journal.

Brunton likened the situation to that of a new freshman in college, who has fewer established credits and therefore, more volatility in a grade point average.

“It's your freshman year in college,” Brunton said. “You take two summer classes and get As -- what does that do to your GPA?”

Brunton also spoke about the major investments made by Qatar’s sovereign wealth fund, the Qatar Investment Authority.

“They have a large sovereign wealth fund, because they’re a wealthy country,” he said, making the analogy of a university endowment that's put to particular uses by an educational institution. “The point is to have it grow over time. You have to be somewhat risk-averse.”

Speaking on the fund’s large acquisitions in U.S. infrastructure, including Qatar’s purchase of a piece of a real estate trust with holdings including the Empire State building, Brunton called the general American investment trend a “reasonable investment strategy.”

“They’re buying things that they think have future value,” he said, citing past examples such as Japanese investment in the U.S. in the 1980s.

Part of the appeal, Brunton said, is the strength of the American response to the 2008 crisis, and the general strength of its real estate markets.

However, the investors also appear to be making shrewd individual decisions on established properties with relatively stable values, the way art aficionados would, for example, make purchasing decisions at an art auction.

These foreign investments, Brunton said, can be good for the U.S., too.

In general, he said, the idea is that when foreign groups invest in infrastructure projects, it helps to boost American efforts at improvements. Brunton gave the example of British, Dutch and French investments in things like canal and railroad stocks during previous eras of American development.

“(Modernization) would've taken longer without the investments,” he said.

However, Brunton stated that principle usually only affects investments in new infrastructure, items that will substantially change the national landscape, while often creating many new jobs.

Although the Empire State Building trust deal has been the major news on Qatar’s U.S. investments this year, reporting from 2015 shows Qatar’s ambassador to Washington, Mohammed Al Kuwari, contending that future investments will “target various sectors of the U.S. economy and help create American jobs.”

Past examples of Qatar’s involvement support this idea; for example, in past years, the Washington Post and other outlets have reported on Qatar’s investment in D.C.’s Center City project.