Loan growth in GCC countries like Qatar is largely being fuelled by the falling greenback and in spite of central banks' efforts to restrict the increase in borrowings, according to an EFG-Hermes report titled 'MENA Banking Sector: Geared for Growth'. "Despite spreads and costs pressures in some countries, strong asset growth and provisioning charges in a benign economic environment should support average earnings growth of 16 percent for MENA banks over the next three years, with the highest growth expected in Qatar, Egypt and Saudi Arabia," the retail investment bank said. Looking at banking fundamentals, EFG-Hermes said Qatar is its preferred country within the GCC, largely due to strong momentum in investments and overall economic growth. "From a valuation perspective, however, Qatari banks are the most expensive in the region. Qatar is the country with the strongest momentum and low banking penetration." The country's accession to the World Trade Organisation (WTO) means the country would have to lower entry barriers for other banks. "We are seeing growing ambitions among GCC banks for expanding outside their home markets and we believe this is likely to be a key driver for a decline in market concentration," said EFG-Hermes.. On the hydrocarbons sector in the country, EFG-Hermes said Qatar has high hydrocarbon empowerment per capita. "On a reserves per capita basis, this ranges from $3m for the UAE and $13m in Qatar. However, this only tells part of the story as the vast majority of the population in these countries consists of expatriates and therefore the hydrocarbon reserves per citizen is therefore far above its nearest peers, ranging from $13m in Kuwait to $43m in Qatar." While the country is largely dependent on its oil and gas industries for revenues, EFG-Hermes says developments like The Pearl-Qatar and Lusail as well as changes to the legal framework show the country is firmly moving towards creation of a Knowledge-Based Economy (KBE). "Initially this will be an extension of those businesses related to the hydrocarbon and petrochemical industry, such as specialised insurance and project finance, but as it meets with more success, this is likely to broaden into other areas subsequently." This will result in greater opportunities in large corporate and semi-public short-term financing along with increased volumes in construction and mortgages. "Growth will revert in due course to the Small and Medium Enterprises (SMEs) and retail sectors as strong immigration catches up with current investment spend," said the bank. Qatar has made its intentions clear locally and internationally of its plans to veer to a knowledge-based economy and several meetings and seminars have been held here to shore up the SME sector. As it has taken Qatar time to utilise its revenues in terms of investments in areas like infrastructure, certain risks are involved. However, EFG-Hermes said it anticipates substantial success for Qatar's future plans. The Pen

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