DUBAI (Reuters) -Qatar set a 2021 budget of 194.7 billion riyals ($53.5 billion) on Thursday, a 7.5% cut in expenditure from 2020, and forecast a deficit of 34.6 billion riyals next year on lower revenues
However, a conservative oil price assumption means the actual shortfall could be lower, analysts said.
The Gulf state expects total revenues of 160.1 billion riyals next year, compared with 211 billion riyals in the 2020 budget, based on an average oil price of $40 per barrel, the finance ministry said in a statement.
Oil revenues are expected to be 121.6 billion riyals next year, a 27.6% drop when compared to what was budgeted for 2020.
Crude oil prices provide a benchmark for gas prices, which has an impact on Qatar as one of the world’s biggest liquefied natural gas (LNG) exporters.
The $40 per barrel oil price assumption “reflects a continued policy of conservative revenue estimation to maintain a fiscal balance and minimize the impact of the fluctuation in energy prices on the state budget,” the finance ministry said.
James Swanston, MENA economist at Capital Economics, said the projected drop in revenue was slightly surprising but was likely a result of Qatar’s conservative oil price estimate.
“We anticipate Brent crude to rise to around $60 per barrel by the end of next year and, on that basis, the budget deficit may be narrower,” he said.
Oil prices have recovered since tumbling to their lowest in almost two decades this year as the COVID-19 pandemic hit demand, but they are still largely below last year’s levels.
Qatar’s projected deficit will be covered using available financial resources or through issuing debt in the local and international markets if needed, the ministry said.
Next year, Qatar plans to spend 72.1 billion riyals for major projects, the ministry said, including some related to the soccer World Cup, which the country will host in 2022.
That represents be a 19.9% annual reduction in spending on major projects. Qatar also plans to cut spending, though to a smaller extent, on salaries and wages and on current expenditure.
“The spending plans are broadly in line with expectations and well within Qatar’s ability to finance even if oil is at or below its assumption,” said Rory Fyfe, managing director at MENA Advisors.
Qatar could see its economy shrink by 4.5% this year, the International Monetary Fund has predicted. That would be the smallest contraction among Gulf countries, it said.
($1 = 3.64 Qatar riyals)
Reporting by Davide Barbuscia; Editing by Jane Merriman and Alexander Smith
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