Qatar’sEconomy: Al Meera Case Study
Considereda developed state, Qatar has risen its economy over the past coupleof years. The country is favored by having rich oil fields and is theleading oil exporter in this world. This paper focuses on variousaspects of Qatar`s growth, highlighting and giving figures oneconomic factors such as inflation rates, Unemployment rates, thestate of oil prices and the f industry. The article focuses on AlMeera company and its influence on Qatar’s food industry,addressing various economic variables such inflation, interest ratesand how oil prices affect the industry. The article also analyses thegrowth of Al Meera over the past years and gives a brief descriptionof the company’s future plans. Qatar’s currency is the QatariRiyal, which is shortened as QAR or QR in this paper. Otherabbreviations include GCC, which stand for Gulf Cooperation Counciland comprises of six middle eastern countries, namely Saudi Arabia,Qatar, Kuwait, Bahrain, Oman and the United Arab Emirates.
Qataris a sovereign country situated in the western part of Asia. Thecountry lies on the northeastern coast of the Arabian Peninsula andborders Saudi Arabia to the south and has the Persian Gulfsurrounding the remaining parts of its territorial space. The countrygained independence from the British in 1971 and has since the early19thcentury, been ruled by the House of Thani, where Sheikh Mohammed AlThani was the state’s founder. Boasting the world’s largestnatural gas and oil reserves, Qatar is a developed country and has ahigh-income economy. Qatar is, therefore, an advanced Arab state andhas been categorised as a country of outstanding human development bythe UN. The 2022 FIFA World Cup will be hosted in Qatar.
Analysisof Qatar’s Economy
Qatarboasts a very stable economy, with petroleum and natural gas beingthe country’s backbone. These resources account for more than 60%of the country’s gross domestic product (GDP) and more than 70% ofthe total government revenue. These GDP rankings are the highestglobally. In 2015, consumer price inflation was mainly driven byeducation. This saw a growth by 13.5% which accelerated to the lastquarter of the year. In the first quarter of 2016, inflation rateeased to 3.2% with primary drivers being culture and recreation up at8.9%, water housing and electricity at 5.7 and transport which saw anincrease of 1.8%. This was characterized by a fuel price hike of 30%.The sector is likely to be a contributor to inflation (Ministry ofDevelopment Planning and Statistics, 2016).
Figure1.0: Qatar’s Quarterly Inflation(Year on Year)
Inover 15 years, the fiscal balance in expected to register its veryfirst deficit. This can be attributed to the lower gas and oilrevenues as well as the large outlays in expenditure. The low oilprices are also expected to influence the current external accountbalance negatively. The balance is however expected get better 2017and 2018 in which oil prices are projected to recover (Ministry ofDevelopment Planning and Statistics, 2016).
Qataris experiencing a rise in bank lending. The banking sector is facingvarious problems, though most financial institutions are projected tosee a sustained credit growth in future years. Banking revenues havebeen affected by large construction projects which are led by thegovernment. The country is expecting a budget deficit of $12.8billion, which has not been experienced in one and a half decade.Future lending capacities have been put in question since thedomestic banking sector has seen the constant withdrawal of publicdeposits. This has raised concerns of Qatar’s future lendingcapabilities due to the uncertain availability of liquidity. Creditinsurance is therefore projected to increase all through this period[ CITATION Oxf16 l 1033 ].
Qatar’sspending is estimated to be 123574.64QAR Million, which is expected to rise to about 167724.10 QAR Millionin 2020. According to Trading Economics, trade surplus dropped to7.7 billion in October 2016, which was a decline in comparison to2015’s 11.7 billion. Lower petroleum sales have been attributed tothese drops. Figure1.1: Qatar Consumer Spending Forecast 2016-2020However,imports rose to 11 billion, which was an average increase of 6.5percent. The growth has been attributed to increase in electricalequipment for telegraphy. Main import partners were the UAE at 8.7%of the total imports, Germany at 10.4%, China at 10.1% and the USAat 22.9%. Since 2004 until 2016, The balance of trade averaged to28430.82 QAR Million. The unemployment rates rose from 0.2% in 2015to 0.6 % in 2016. These rates are expected to rise to around 1.20% in2020. (Trading Economics 2016) Figure1.2: Qatar’s Annual Unemployment Rate In2015, the government’s outstanding debt in 2015 was QR258.3billion, which was equivalent to an increase of QR 66.7 billion from2014’s debt. In comparison, 2015’s debt was equal to 42.5% of thecountry’s nominal GDP. Qatar is home to numerous non-hydrocarbonindustries which play a vital role in the economy. The sector wasresponsible for 2015’s GDP growth, accompanied by construction andservice sector. Oil and gas play a vital role in Qatar’sdevelopment. With oil prices expected to rise in 2017 and 2018,future growth of Qatar is projected to be tremendous. Thenon-hydrocarbon sector is also expected to boost the growth of Qatar.It should be noted that most of the hydrocarbon industries are now,having been constructed in the last decade. Al Meera AlMeera is a local supermarket chain that has dominated the retailindustry in Qatar. Al Meera seeks to provide quality products andservices at fair prices and provide customers with a value for money.Emphasis will be on the food industry, though Al Meera offers a widerange of food and non-food products. The company has signed franchiseagreements with leading international brands such as Britain’sWHSmith and France-based Casino Group to facilitate customers’access to quality international products. The company acquired AlOumara Bakery and Qatar Markets Company W.L.L to enhance its futuredevelopments. Other well-known companies in the same sector includeGelato, Qatar food company, Qatar Tunisian Food Company, Lee Topservices andAyanKar Bhavan. The food industry benefits from a strong consumeroutlook. Despite temporary economic hindrances, high-income levelssupport positive food expenditure. Qatar’s increase in populationhas led to an increase in consumption. The increase in food demandshas been influenced by urbanization, an active tourism sector, andhigh public wage bills. Overall consumption in 2012 was at 40.9million metric tons. In2012, The region’s per capita foodconsumption was averaged at 851.9 kilograms. Influence of Various Factorsto the Food Industry Accordingto World Bank data, food prices have fallen 24.3% since early 2014.Qatar’s food inflation has fallen with lower global prices since itimports majority of its food. Among the factors that contribute toglobal food prices lower is a drop in food demand, According tointernational monetary funds, the expected food GDP is weakening dueto the slower rates of global growth. Favorable weather conditionshave also helped in boosting the supply of numerous food products.Food products such as wheat, rice, maize, soybeans, palm oil andsoybean oils have also been on the rise. Lower oil prices have alsocontributed to the drop in food inflation. This can be attributed tothe intensive energy requirements that are needed in the agriculturalsector. (GulfDigital Group, 2016). Thedrop in oil prices has led to aprojection of a climb in interest rates. Bank liquidity in the GulfCooperation Council is tightening due to more than 50% decline in oilsince 2014. Thishasslowed deposits which resultsto the government’s increased borrowing. It isalso estimatedthat GCC nations may face a $140 billion deficit should oil pricesmaintain the current trend. SWOTAnalysis of food industry TheSwot Analysis highlights the Strengths, Weaknesses, Opportunities andThreats in the food industry. Following the above order, The foodindustry has seen a great degree of subscriber customization. Thenation also has great marketing and promotional strategies. Peoplehave the choice of healthier meals and there are good partnershipsbetween suppliers and food markets. Weaknesses in the food sectorinclude an unhealthy food menu, which is characterized by increasedfactory-processed foods. The pricing of individual products is also aweakness, since products are sometimes overpriced. The industryboasts opportunities such as increased demand for healthy foods aswell as positive changes in the customer habits. This brings aboutnew customers in a given market. Finally, the industry suffersthreats such as saturation of fast foods. Qatar’s economy isdeveloped and thus sees a production of many fast foods. The trendtowards healthy eating is also a threat on its own, since it meansthat people are opting for one market against another. This threatcan also be attributed to the increase of fast food restaurants whichhas caused a shift in customers. Al Meera Company AnalysisThecompany has seen a steady increase in revenue, gross marginpercentage, and operating capital. The company operated at a revenueof 1,164, which increased to 1,946, 2, 176, 2,449, and 2,578 QARmillions in 2011 to 2016 respectively. Further, gross marginpercentage, in the same order of years, was 15.1, 17.0, 16.4, 16.7,17.4 and currently at 17.3%. Al Meera’s profitability score issignificantly higher than those of its peer groups. The score, whichcurrently stands at 6 shows how well Al Meera is performing incomparison to its competitors. (Infinancials, 2016).Figure1.3: Al Meera’s Growth Profitability Risk Value Analysis AlMeera has been ranked to be among the best non-banking performers. In2016, Al Meera’s financial performance was recorded to be secondhighest with annual 5-year returns being at 43%. The company’sReturn of Equity stood at 40%, sharing the same figure withDebt-to-Equity ratio. It’s average profit after tax stood at 20%over the last three financial years. The company has seen a steadyincrease in sales in the past five years. In the company’ssemi-annual financial statements, Al Meera announced a sales increaseof 10.6%, to 1.35 billion QR from 1.22 billion QR (Qatar ProjectsMagazine, 2016). Thecompany reports a drop in the debts. In 2015, the company had a TotalCapital ratio of 6.06%, as compared to 2014’s 6.68%. For 2015’sfiscal year, the total debt was reported at 88.53 million QAR. Thetotal debt equity was 0.0665, and the total capital was at 0.0606. (Financial Times, 2016)Figure1.4: Al Meera Company Annual Net Debt AlMeera’s advancement is on the rise, where it was reported that itwas finalizing its expansion, which includes the opening of five newstores. The company had initially reported plans to open 14 newstores in 2015. The five new stores are scheduled to be opened in AlWakra, North Sailiya, Bu Sidra, Um Salal Ali and Leaibab 2. ConclusionDespiteQatar’s slight decline in the economy, it is a great achievementfor Al Meera to top the lists of best business performers. Favored bybeing a developed country, Al Meera’s exemplary performance can beattributed to solid strategies which move in pace with Qatar’sdevelopment plans. The success is proof of the company’s innovativeplans. The company aims at fulfilling the business needs of itscustomers, stakeholders and shareholders. The company boasts of beingamong the main pillars of Qatar’s economy, playing a huge role inthe country`s development.References
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