Economic Analysis
Qatar

Qatar

Population 2.7 million
GDP per capita 54,185 US$
A4
Country risk assessment
A3
Business Climate
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 0.8 -3.6 3.7 4.0
Inflation (yearly average, %) -0.7 -2.7 2.5 3.2
Budget balance (% GDP) 4.9 1.3 2.8 5.7
Current account balance (% GDP) 2.4 -2.4 4.0 4.0
Public debt (% GDP) 62.3 72.1 59.0 53.0

(e): Estimate (f): Forecast

STRENGTHS

  • World 3rd largest natural gas reserves, sizeable oil reserves
  • Low public debt, strong public accounts
  • Social and domestic political stability, high per capita income
  • Business friendly environment, up to 100% foreign ownership allowed in all sectors, low level of corporate tax
  • Reduced geopolitical risks in line with GCC reconciliation
  • Efficient infrastructure and logistics services

WEAKNESSES

  • Small economy, mostly dependent on hydrocarbons
  • Exposure to volatility in energy prices

RISK ASSESSMENT

Resilient growth in 2022

The strong demand for gas, its rising price, the holding of the FIFA World Cup 2022 and the re-opening of the economy in line with the vaccination campaign   will continue to support growth in 2022. As of November 2021, 76% of Qatar’s total population had been fully vaccinated. The authorities announced the removal of all mobility restrictions in late-July 2021, which will continue to boost consumer and business confidence.   Private consumption (25% of GDP) will accelerate ahead and during the FIFA Soccer World Cup due in November 2022. Revived tourism in line with the completion of the vaccination campaign in originating countries and the organization of the World Cup will also add to its performance.  Tourism receipts (around 10% of GDP in normal times) are expected to increase in 2022 to USD 8 billion after falling as low as an estimated USD 4 billion in 2021. Moreover, the removal of the blockage by its neighbours will allow Qatar to benefit from a higher level of tourism revenues. Indeed, 30% of total tourist arrivals in Qatar were from the Middle East in 2019.  Within the Vision 2030 program, the authorities earmarked up to USD 6.9 billion for transport and infrastructure projects ahead of the World Cup and nearly 3 billion for event facilities and event-specific projects. These investments will contribute less to the national output compared with the 2015-2019 average as many of the World Cup-related projects are close to completion.  However,  Qatar’s willingness to expand its gas and oil assets will sustain investment (40% of GDP ). Qatar Petroleum announced plans to spend USD 82.5 billion in capital expenditure between 2021-2025, mainly to expand its existing oil and gas assets. The largest project is the North Field Expansion, which aims to increase its gas production from 77 million tons per annum (mtpa) in 2021 to 110 mpta by 2025. The second expansionary project is related to the Dukhan onshore oil and gas field. Infrastructure construction also continues with Qatar General Electricity and Water Corporation (Kahramaa) seeking to implement independent water and power projects to increase power capacity. Official data indicates that the country has around 100 hotels and tourism related accommodation projects in the pipeline with over 21,000 rooms under construction. Data suggest that Qatar will have nearly 185 hotels and services apartments by the end of 2022. Improvement of the relations with neighbours will create new opportunities for Qatar to attract investments.    

 

Strong external and fiscal accounts

Qatar’s external position will remain strong on the back of continuous current account surpluses resulting from the high level of energy prices and demand. However, Qatar’s decision to cut its gas export prices in order to expand into the Asian spot markets will weigh on exports revenues. Hydrocarbon exports (90% of total exports) will gradually rise in line with the expansion of the gas North Field. On the other side, the completion of many World Cup-related projects will drag down import demand in 2022.

 
Growth in hydrocarbon revenues will sustain fiscal revenues amid higher business activity. A likely introduction of a 5% VAT, probably ahead of the World Cup, will also support these revenues. Nevertheless, revenues will continue to remain mostly dependent on hydrocarbon revenues (40% of total revenue). Fiscal spending will decline in 2022 due to the fall in capital expenditures and the roll back of COVID-related expenses. Most of the state-owned enterprises are tapping into international markets to raise funds they need to pursue new investments. Indeed, Qatar Petroleum sold USD 12.5 billion in bonds in June 2021, its first issuance. In line with higher budget surplus, Qatar’s debt position is expected to improve in the upcoming period. Sizable assets in Qatar’s sovereign wealth fund (QIA) (estimated at around USD 300 billion or 170% of GDP), on top of foreign exchange reserves representing close to 40% of GDP, will continue to act as a shield to protect the country from any external shocks, reducing fiscal risks.

 

Reconciliation with Arab neighbours reinforces mediation role

In January 2021, Saudi Arabia, the United Arab Emirates, Egypt and Bahrain (the quartet) decided to restore relations with Qatar, thus terminating their blockade instated in 2017. Their relations are expected to improve further in 2022 because of a higher need of regional cooperation in the perspective of any agreement between the U.S. and Iran. Holding closer ties with Qatar will also allow the quartet to keep warm relations with the U.S. as Qatar hosts one of the largest U.S. military bases in the world.   Qatar will continue to play a mediator role in the region as it holds close relations with Turkey and Iran. Qatar and the U.S. also agreed that Doha would represent the diplomatic interests of the U.S. in Afghanistan. The country, under the rule of emir Sheikh Tamim bin Hamad al-Thani, will maintain its domestic political stability in the upcoming period in line with its high per capita income. On the other hand, the dependence of fiscal and export revenues on hydrocarbons will leave the country vulnerable to any sustained fall in prices. 

 

Last updated: February 2022

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