The economic and financial impact on Qatar of a nine-month Saudi-led blockade is fading, but some risks for the Persian Gulf emirate remain, the International Monetary Fund has said.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut all diplomatic and trade ties with Qatar last June, closing its only land border and banning all flights to and from the emirate, AFP reported.
Qatar’s GDP growth is expected to grow at 2.6% in 2018, IMF said, noting that the country’s medium-term macro-financial outlook will remain broadly favorable.
While the implementation of the public investment program and the ease in the pace of fiscal consolidation would help support growth, the continuation of the diplomatic tensions could weigh on confidence, IMF added in preliminary findings of IMF staff at the end of an official visit to Qatar.
In a report released late Monday, the IMF said the effect of the blockade on economic activity in Qatar had been “transitory” as new trade routes were quickly established and growth remained positive.
Foreign financing and resident private sector deposits had fallen by $40 billion but that had been offset by cash injections by the central bank and the Qatar Investment Authority—the emirate’s sovereign wealth fund, it said.
Like other Persian Gulf energy producers, Qatar has been hit by the slump in world oil and gas prices which has forced it to introduce austerity measures to balance its books.
A combination of the austerity measures and the blockade saw non-hydrocarbon growth fall to 4% in 2017 from 5.6% the previous year, the IMF said.
At 2.1% gross domestic product growth in 2017 was only slightly down on the 2.2% registered in 2016. The budget deficit narrowed to 6% of GDP compared with 9.2% in 2016.
Although Qatar’s economy and banking and financial systems remain sound, there are still some risks, the IMF said.
“The main risks relate to the possibility of lower hydrocarbon prices, the implementation of planned fiscal measures and uncertainty associated with the lingering impact of the diplomatic rift.”
An escalation of the rift with Saudi Arabia and its allies could adversely affect external funding and growth, the IMF warned, adding that the banking system had to adjust to a new funding model.
Fulfills Commitments
The blockade did not affect the fulfillment of Qatar’s commitments to supply gas to its customers in the world, as it is the largest exporter of LNG. The attempts to harm the national currency was not successful due to prudent monetary policy adopted by the Qatar Central bank, Dr Khalid Rashid Alkhater, specialist in monetary policy and political economy, said during a seminar organized on Sunday at Ritz-Carlton Hotel under the theme ‘Qatar Dignity and Victory After Nine Months of Siege’.
Alkhater pointed out that the Qatari economy enjoys great resources, and the new policy of the country is moving towards economic diversification and is continuing infrastructure development.
To face the siege, the Qatari government has played an important role as importer and distributor and to maintain the price of several products through diversifying the sources and means of imports, he said.
Qatar has also adopted policies to stimulate local production and private sector to increase the production in agricultural and livestock production and other industries. It has announced to increase the production of gas by 30% and is working on expansion of storage capacities for food security and logistics.
