Qatar recorded a budget surplus of 10 billion riyals ($2.74 billion) in the second quarter of 2023, the finance ministry said on Thursday, despite lower hydrocarbon revenue and a sharp rise in spending.

Combined with the fiscal surplus of 19.7 billion riyals in the first quarter, Qatar has already surpassed its 2023 surplus forecast of 29 billion riyals, which was based on an oil price of $65 per barrel, well below average prices.

Qatar's real GDP grew by 2.7% year on year in the first quarter, a ministry of finance report also stated, with the hydrocarbon sector growing 4.1%, and the non-hydrocarbon sector expanding 1.9%.

Second quarter figures have not yet been published.

Total revenue for the second quarter stood at 68.4 billion riyals, of which 40.3 billion riyals was oil revenue, down 30.9% from the prior year period, while non-oil revenue totaled 28.2 billion, according to finance ministry figures.

The drop in hydrocarbon revenue does not indicate any problems and this kind of volatility could be due to several factors, said Justin Alexander, director of Khalij Economics and Gulf analyst for GlobalSource Partners.

"These could include the impact on export earnings of LNG (liquefied natural gas) maintenance downtime and the timing of the dividend payments from QatarEnergy," he said.

The budget surplus is expected to go towards repaying Qatar's public debt, boosting central bank reserves, and increasing the capital of the Qatar Investment Authority, the gas-rich state's sovereign wealth fund.

Total spending in the second quarter amounted to 58.4 billion riyals, up 12.1% year on year, and almost 20% from the previous quarter. The ministry attributed an almost 30% jump in major capital spending in the second quarter to compensation to contractors and the completion of several projects.

Total public debt reached 343.6 billion riyals at the end of the second quarter, down 3.5% from the first quarter.

($1 = 3.6452 Qatar riyals)

(Additional reporting by Yomna Ehab Editing by Mark Potter)