Economic resilience despite lingering risks due to ongoing conflict with regional neighbors


MEDIUM RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD168bn (World ranking 54, World Bank 2017)
Population 2.6mn (World ranking 141, World Bank 2017)
Form of State Emirate
Head of State Emir Sheikh TAMIM bin Hamad Al Thani
Next elections None
  • Unlike elsewhere in the region, leadership has been passed to a younger generation, providing a degree of popular support in the short term
  • U.S. military support affords some regional protection
  • Long-term development strategy that has accelerated diversification away from upstream oil and gas
  • Large foreign asset base, including a Sovereign Wealth Fund estimated at USD320bn
  • Regional instability (including Iraq and Syria) and uncertainties (including Iran) impact on risk perceptions
  • Conflict with some other Arab states in the region (notably Saudi Arabia, UAE, Bahrain, Egypt) that escalated in June 2017, resulting in significant economic measures against Qatar
  • U.S. military bases and the country’s oil and gas facilities are potential targets for terrorist or extremist groups
  • Despite the active policy of economic diversification, the economy relies heavily on hydrocarbons and this leaves it vulnerable to changes in levels of global activity and in international commodity prices
  • Data transparency remains weak for an economy of its size and strategic importance

Regional tensions

In June 2017, Saudi Arabia, the UAE, Bahrain and Egypt (sometimes called the GC3+1) cut their diplomatic relations with Qatar, accus¬ing Doha of supporting Islam-ist groups and terrorism, a charge Qatar denied. In addition, the states announced the suspension of air, sea and land transport and travel with Qatar. And, with the exception of Egypt, Qatari citizens were required to return home. These restrictions, especially the fact that Qatar's land border with Saudi Arabia – its only land crossing – were suspended, were more severe than those during a previous eight-month dis-pute in 2014, when Saudi Arabia, the UAE and Bahrain withdrew their ambassadors from Doha over similar accusations. At that time, trade and travel links were main-tained. Moreover, in 2017 Gulf media aired rumors on a potential future coup against the Qatari head of state, Emir Sheikh Tamim bin Hamad Al Thani.

In the meantime, the tensions have prevailed but not further escalated. Qatar is un-likely to accept the terms offered by the GC3+1 in the foreseeable future. However, the U.S. – which has strong ties with Saudi Arabia but also an important military base in Qatar – insists on a diplomatic solution and has signed a memorandum of understanding with Qatar on countering terrorism finance, indicating its support for conciliation over leadership change. Furthermore, Turkey’s support for Qatar and Turkish pressure on Saudi Arabia following the murder of a Saudi journalist in Istanbul in October 2018 have also raised the likelihood of a settlement of the crisis in the medium term. 


Moderate but robust economic growth

The political conflict with the GC3+1 had an immediate but short-lived impact on the Qatari economy. Thanks to a huge stock of assets in its sovereign wealth fund, the Qatar Investment Authority (QIA; currently estimated at USD320bn), Qatar has been able to avoid an economic crisis. A swift diversification of foreign trade relationships and trade routes was also helpful. Shipments of natural gas and oil, accounting for almost 85% of Qatar’s exports, have broadly continued despite the UAE’s ban on Qatari-linked vessels from its waters.

Still, real GDP growth fell to a 23-year low of +1.6% in 2017. The blockade by the GC3+1 certainly played a role. However, in part that weak performance also reflected a decline of -1.1% in mining and quarrying (accounting for 30% of GDP) as oil pro-duction cuts agreed under an OPEC deal from November 2016 curbed output in the hydrocarbon sector.

In 2018, GDP growth recovered to an average +2% y/y in the first three quarters and we expect a similar outcome for the year as a whole. Mining and quarrying continued to contract in Q1-Q3 2018, by -2% y/y, although the decline narrowed to just -0.1% y/y in Q3 thanks to increased oil output. Meanwhile, the non-mining and quarrying activities rose by +5.7% y/y in Q1-Q3 2018, thanks to healthy growth in the manufacturing (+10%) and construction (+14%) sectors.

At the start of 2019, Qatar withdrew from OPEC, highlighting the policy rift with its neighbors as well as its gas-focused growth strategy. In the near term, this will allow it to raise oil production in 2019 as it will not have to comply with the renewed output cuts agreed by OPEC in December 2018. We forecast full-year GDP growth of +2.7% in 2019. The tentative forecast for 2020 is +2.5%.


Inflation, Public finances and External balance

Inflation will remain moderate and the exchange rate peg should hold

Inflation is forecast to rise from an average 0.2% in 2018 to a still moderate 1.5% or so in 2019. It should accelerate further to about 3% on average in 2020 as a result of the planned introduction of a 5% VAT in that year. However, the implementation of the VAT has been delayed several times and another postponement cannot be ruled out.
The riyal (QAR) is pegged at 3.64 to the USD. We expect the peg to hold as the Cen-tral Bank has large foreign exchange (FX) reserves (about USD28bn at the end of 2018) to support the currency.

Public finances to remain solid

After 16 years of continued large surpluses, persistent low oil and gas prices from mid-2014 to 2017 pushed the annual fiscal account into deficit in 2016-2017. As the oil price recovered in 2018 – to an average 72 USD/bbl (for benchmark Brent), well above Qatar’s fiscal breakeven point estimated at 60 USD/bbl – the fiscal account moved back into a small surplus. We expect similar surpluses in 2019-2020.
Meanwhile, public debt has risen from 25% of GDP in 2014 to more than 50% in 2018 and is forecast to remain above that threshold in 2019-2020.
However, Qatar will remain a large net external creditor thanks to the huge foreign-asset position in the QIA (currently estimated at USD320bn).

External liquidity to remain unproblematic

In line with the fiscal account, the current account shifted into a deficit in 2016 (-5.5% of GDP) after 17 years of continued large surpluses. However, it rebounded to a surplus as early as 2017 (+3.8% of GDP). For 2018-2020, annual surpluses between +5% and +10% of GDP are forecast.
External debt is relatively high, incurred by oil and gas investments since the 2000s, but repayment obligations are unlikely to present liquidity problems. The debt service to export earnings ratio stands at a moderate 13% or so.
Financial resources will remain strong. Combined FX reserves of the Central Bank and the QIA represent well over 150% of annual GDP and cover more than 50 months of imports. 


Trade structure by destination/origin

(% of total)

Exports Rank Imports
Japan 22%
12% China
Korea, Republic of 15%
11% United States
India 13%
9% United Arab Emirates
China 6%
7% Germany
United Arab Emirates 6%
7% Japan

Trade structure by product

(% of total)

Exports Rank Imports
Gas, natural and manufactured 54%
13% Road vehicles
Petroleum & products thereof 28%
8% Other industrial machinery & parts
Plastics in primary forms 2%
6% Electrical machinery & appliances
Organic chemicals 1%
6% Other transport equipment
Fertilizers 1%
5% Iron and steel

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings