Growth set to rebound after weak 2013
Another year of weaker growth is in store for 2013, with GDP forecast to rise 5%. This compares with an estimated 6% in 2012. Strong government spending will continue to drive the non-oil sector, albeit at a slower pace. Heavy infrastructure investment and high recurrent spending will increase significantly. Growth is expected to rise to 6% in 2014, mainly because of higher liquefied natural gas production.
The budget surplus in July-September was surprisingly large, as revenues jumped 74%. We now expect the fiscal surplus to be just over 10% of GDP in 2012-13, well above the consensus. Even so, the surplus is forecast to narrow to 5.5% of GDP in 2013-14, due to strong infrastructure spending and less favorable hydrocarbon trends.
Consumer prices jumped 0.7% in January on the back of another large rise in rentals. This pushed annual inflation up to 3.4%. Inflation is forecast to average 3.7% this year and 4.2% in 2014, fuelled by further rises in rentals and higher food prices.
Annual GDP growth is set to average 6% over the medium to long term. The main risks relate to failure to control potential overheating in the real estate market, high government spending and potential large falls in hydrocarbon prices.
Real GDP growth
Source: Oxford Economics.
Inflation
Source: Oxford Economics.
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