2019 budget projects a 3.6 percent de- QATAR crease in capital spending as some FIFA Recent developments projects are completed; this should help offset a 7 percent increase in current spending, and limit growth in total Growth slowed in 2017 to 1.6 percent, spending to 1.7 percent. The 2019 budget Table 1 2018 the weakest in over two decades, due to projects a surplus of US$1.2 billion (or P o pulatio n, millio n 2.7 a diplomatic rift with some GCC coun- about 0.6 percent of GDP), but outturns GDP , current US$ billio n 181.1 tries that had culminated in the severing are likely to be higher on account of con- GDP per capita, current US$ 67182 of trade and diplomatic ties in mid -2017. servative budget assumptions. a However, with a rerouting of trade and Qatar is the largest LNG exporter globally, Scho o l enro llment, primary (% gro ss) 103.7 Life expectancy at birth, years a 78.2 opening of a new port, the economy has and goods export earnings rose by 25 per- recovered, posting average quarterly cent in 2018, led by higher gas prices and Source: WDI, M acro Poverty Outlook, and official data. Notes: growth of 2 percent (y/y) in the first production from the North Field, Qatar’s three quarters of 2018. The economy has biggest gas repository. This has helped (a) M ost recent WDI value (2016) also been supported by continued infra- increase the current account surplus to 8.7 structure spending related to prepara- percent in Q3 2018, from less than 4 per- tions for hosting the 2022 FIFA World cent in 2017. Cup; consequently the impacts of the The banking system remains well capital- (still ongoing) rift have been relatively ized and asset quality strong. Liquidity short-lived and the economy is estimat- pressures that emerged following the rift Growth is estimated to have recovered to ed to have grown by 2.1 percent in 2018. in 2017 have fully waned (in part due to 2.1 percent in 2018, as activity has grad- Qatar’s withdrawal from OPEC in Janu- increased government deposits into the ually recovered from the effects of a diplo- ary 2019, after six decades of member- banking system), and foreign exchange matic rift between Qatar and some GCC ship, has not had a major impact since reserves have recovered to pre-rift levels. neighbors. The economy is expected to Qatar was one of the smallest members Despite the peg to the US Dollar, the cen- of OPEC, making up less than 2 percent tral bank has not lifted policy rates in line expand by 3 percent over the medium of OPEC's total oil production. with the US Fed, reflecting efforts to sup- term, helped by continued investments Public finances have improved, support- port the economy. Investor confidence related to hosting the football world cup, ed by the recovery in energy prices, and remains underpinned by financial assets and as a large natural gas facility comes Qatar is expected to post a small fiscal of over US$300 billion held in a sovereign surplus in 2018, the first since 2014. A wealth fund and demonstrated in Qatar’s onstream. Downside risks stem from vola- large public investment program for 2014 ability to raise money on the international tility in energy prices and continued dip- -2024 has been pared back, with FIFA bond markets at relatively low yields. All lomatic tensions with Gulf neighbors. The 2022 projects given priority. Although three major credit rating agencies rate diversification of the economy away from the Government has delayed the VAT Qatari bonds as investment grade assets. hydrocarbons remains a key challenge. implementation, it has announced “sin Absolute poverty is not an issue for citi- taxes” that include 100 percent excise zens. Lower incomes correlate with house- duties on tobacco and energy drinks and hold dependency ratio, job market status, a 50 percent levy on sugary drinks. The educational attainment, female headship FIGURE 1 Qatar / Current account balance and exports FIGURE 2 Qatar / Real GDP growth Percent of GDP Percentage change Percentage change 80 12.0 4.5 CA balance 70 4.0 10.0 Goods exports 60 3.5 8.0 50 3.0 6.0 2.5 40 4.0 2.0 30 1.5 20 2.0 1.0 10 0.0 0.5 0 -2.0 0.0 -10 2014 2015 2016 2017 2018 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Real oil GDP Real non-oil GDP Real GDP (RHS) Sources: Haver, World Bank. Sources: Haver analytics, World Bank. MPO 172 Apr 19 and disability. Unemployment is low, at central bank resumes raising interest capital flows and costs of funding alt- 0.1 percent for the total labor force and 1.8 rates to restore the spread versus US pol- hough these are mitigated by the return to percent for women. Spatial differences in icy rates, and to attract FX inflows into fiscal and current account surpluses. welfare exist, both for monetary and non - the banking system. There are several domestic risks. On the monetary measures, notably between Public finances are expected to remain in domestic front, Qatar ’s investment and more urbanized and less urbanized areas. small surplus, supported by recent tax hydrocarbons-driven growth strategy reforms and the introduction of a VAT over the past decade has helped to trans- over the medium term. A recovery in im- form standards of living for citizens; Outlook ports, driven by capital goods related to infrastructure spending, should keep the however, it has also given rise to con- cerns about excess capacity in the econo- current account surplus in single-digits (in my and resulted in a narrow economic The outlook remains positive with contrast to surpluses of over 30 percent base – although the investment in ports growth expected to rise to 3.4 percent by prior to 2014). proved to be an important instrument for 2021 driven by higher service sector dealing with forced trade rerouting. With growth as the FIFA World Cup draws the adoption of its Second National De- nearer. In addition, higher infrastructure spending on Qatar National Vision 2030 Risks and challenges velopment Strategy, Qatar is moving to further open and diversify the economy. projects aimed at diversifying the econo- A new draft foreign investment law ap- my should help offset falling investment Qatar’s economy has largely overcome the proved in 2018 seeks to allow foreigners spending on FIFA projects. Finally, hy- constraints posed by the continuing diplo- to own 100 percent of the capital of com- dro-carbon sector growth is also expected matic rift with GCC neighbors. Neverthe- panies across all economic sectors. This to pick up as the Barzan natural gas facil- less, a resolution of this situation would follows permanent residency reforms ity comes online in 2020, and as the ex- help boost investor confidence. Key exter- introduced last year aimed at attracting pansion of the North Field gas projects is nal risks include risks of volatility in glob- and retain highly-skilled foreign workers completed by 2024. Monetary policy is al energy prices, regional instability risks, to help Qatar become a knowledge - expected to gradually tighten as Qatar ’s and global financial volatility that affects intensive economy. TABLE 2 Qatar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2016 2017 2018 e 2019 f 2020 f 2021 f Real GDP growth, at constant market prices 2.2 1.6 2.1 3.0 3.2 3.4 Private Consumption 5.0 3.7 1.5 1.5 1.0 1.7 Government Consumption -6.7 -17.1 0.4 2.5 3.0 5.8 Gross Fixed Capital Investment 7.4 -3.5 4.0 5.6 5.5 5.5 Exports, Goods and Services 2.1 2.2 2.0 2.0 2.4 2.4 Imports, Goods and Services 10.9 -7.1 3.0 2.2 2.1 2.1 Real GDP growth, at constant factor prices 2.2 1.6 2.1 3.0 3.2 3.4 Agriculture 8.1 -0.2 1.2 1.3 1.4 1.4 Industry 0.8 -0.2 1.5 1.6 1.8 1.8 Services 5.5 5.4 3.3 5.7 6.0 6.4 Inflation (Consumer Price Index) 2.9 0.4 2.0 3.8 2.2 2.1 Current Account Balance (% of GDP) -5.5 3.8 7.5 7.5 7.8 7.7 Net Foreign Direct Investment (% of GDP) -2.9 -2.8 -1.9 -1.5 -1.2 -1.1 Fiscal Balance (% of GDP) -9.2 -5.8 2.0 1.3 2.0 2.3 So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices. No tes: e = estimate, f = fo recast. MPO 173 Apr 19