1. QATAR ECONOMICS OUTLOOK AND PROSPECTS Sh. Abdullah bin Soud Al Thani The Governor Qatar Central Bank Adam Smith Seminar Paris, France, November 13-14,2007

2. 2 Outline  Qatar in brief.  Economic Growth and Per Capita Income.  Public Budget: Revenue, Expenditure and Surplus.  Current Account Surplus.  Inflation.  Monetary Policy.  Banking performance.

3. 3 Qatar in brief  History : Qatar became independent on September 3rd 1971.  Geography: Qatar is suited halfway along the west coast of the Arabian Gulf.  Population: estimated to be about less than one million habitant in 2007.  Capital: Doha

4. 4 Qatar in brief  Q Qatar is a small peninsula in the Arabian Gulf and it is a member of the Gulf Cooperation council. Its total area is about 11.5 thousand kilometer and total population is estimated to be about less than one million habitant in 2007.  With GDP exceeding $ 52 billion, Qatar becomes the richest country in the world as its per capita income soared to $ 62 thousand annually.

5. 5 Economic Growth  Qatar real economic rate of growth was 9% annually in the previous five years, driven by expansion in the production of liquefied natural gas (LNG), and by strong activity in construction and financial services.  Nominal GDP rate of growth ranged between 10.4- 34.8% since 2002.

6. 6 Economic Growth Qatar economic growth (2002-2006) items (%)20022003200420052006 Real7.13.520.86.17.1 Nominal10.421.534.833.824.2

7. 7 Economic Growth  Qatar's macroeconomic performance is expected to remain strong in 2007. High oil and gas prices and ongoing investments to expand capacity in the gas sector are projected to maintain strong GDP growth in the coming years.  The gas sector investments covered both up stream projects especially the LNG and GTL projects while, down stream projects concentrating on building petrochemical complexes.

8. 8 Public Budget BBoth public revenue and expenditure have soared strongly in the recent years. The 2007/2008 expenditure is estimated to exceed $ 19.1 billion and the public budget projects a surplus of 2.8% of the GDP. AAs oil price stabilizes above $40 per barrel, public budget will maintain in surplus in the coming years.

9. 9 $ bn Items ActualBudget 2004/20052005/20062006/20072007/2008 Total Revenues15.117.922.719.9 Total Expenditures10.014.019.118.1 Surplus5.23.93.61.9

10. 10 Current Account  Current account of the Qatari balance of payment has been in surplus in the previous ten years.  The balance of payments position is expected to strengthen further, with the external current account surplus increasing to 31% of the GDP in 2007.

11. 11 Current Account Items20022003200420052006 Current Account4.05.87.67.59.5 Overall Surplus1.84.24.04.55.4 $ bn

12. 12 Inflation DDue to the rapid growth imbalances and bottlenecks in the real estate sector, Inflation has escalated in the period 2003-2007. CCPI inflation jumped from just 0.24% in 2002 to reach 11.8%in 2006 and rose to an annualized level of 12.85% by the second quarter of 2007.

13. 13 Inflation in Qatar Consumer Price Index in Qatar (2002-2006) 20022003200420052006 General Index 100.2 102.5109.5119.1133.2 Rate of inflation 0.22.36.88.811.8 Rent & Fuel101.8120.1139.6176.2221.9 Rent and fuel rate of change 1.8%18%16.2%26.2%25.9% base year2001=100 Source: QCB, database

14. 14 Monetary Policy  Monetary conditions were characterized by ample liquidity and strong credit growth in the previous years. Broad money growth averaged 34% a year during 2004-06 and is projected to grow at about 41% in 2007.  Money supply growth was due to large increases in net foreign assets and increasing credit to finance private and public investments.

15. 15 Qatar Domestic Liquidity $ bn items20022003200420052006 Domestic liquidity (M2) 8.810.212.317.724.4 Rate of change12%16%21%43% 38%

16. 16 Monetary Policy The Qatari riyal pegged to the U.S. dollar (at 3.64 Riyal for each dollar) and complete capital mobility, nominal interest rates in the domestic market have tracked corresponding U.S. rates closely. QCB interest rates framework encompasses three market-oriented policy rates. QMR (QATAR MONETARY RATE) integrates overnight lending and deposits standing facilities into a mechanism designed to navigate overnight money market rates

17. 17 Banking Performance  Banks complied with the QCB's prudential norms and put into place risk management frameworks to implement Basle II.  Qatar banking sector is highly matured in terms of corporate governance, regulatory framework and integration with other sector.

18. 18 Banking Performance Macro-prudential indicators of the banking sector remain strong:  The average capital­ assets ratio of commercial banks (CAR) remained high at 15% as of end-2006.  The gross nonperforming loan ratio declined to 2.2%, from 4.3% at end-2005.

19. 19 Banking Performance Banking sector in Qatar has been one of the faster growing sector, expanding in line with economic growth of the country, in 2006 total assets grew by 47% and the shareholders equity grew by 34% and capital grew by 148%, as compared to the previous year.

20. 20 Banking Performance  The banking sector's profits increased substantially in 2006. Led by robust growth in credit.  Return Equity (ROE) increased to 13.87% in the first half of 2007 while Return on Assets (ROA) reached 1.88%

21. 21 Banking Performance ItemH1-2005H2-2005H1-2006H2-2006H1-2007 Net Profit 0.540.760.840.771.12 ROE(%) 12.0314.914.8111.1313.87 ROA(%) 1.792.1421.481.88 $ bn

22. 22 Doha Securities Market Doha Securities Market index experienced a significant correction in 2006, reversing the 70 percent increase occurred in 2005. With a loan exposure to the equity market was limited, the direct effect of the correction in the banking system was minimal

23. 23 Doha Securities Market

24. 24