World Economy

Qatar in Good Shape

IMF expects Qatar’s real economic growth to be 3.4% this year.IMF expects Qatar’s real economic growth to be 3.4% this year.

Qatar is “well-positioned” to manage the impact that lower oil prices have had on its revenue, the International Monetary Fund has said. The country has taken the necessary first steps to handle new deficits by cutting expenditures and diversifying its economy, the IMF added in a recent assessment.

Though there is a risk of rising inflation and continued lower oil prices, the fund has expressed confidence in Qatar’s economic future, Arabian Business reported.

IMF expects Qatar’s real economic growth to be 3.4% this year. And given Qatar’s substantial financial buffers, the country, which accounts for one-third of global liquefied natural gas trade, is well positioned to mitigate the macroeconomic challenges from sustained lower hydrocarbon prices, the Washington-based global monetary body noted.

Hailing Qatar’s responsiveness to adjust to lower energy prices, it urged the country to sustain its sound policies, which would help strengthen the fiscal position, maintain financial stability, and promote more diversified and sustainable growth.

Due to Qatar’s large buffers, IMF noted there is space to pursue fiscal consolidation at a gradual pace over the medium term to ensure intergenerational equity of Qatar’s exhaustible hydrocarbon wealth, supporting the ongoing and envisaged revenue and expenditure measures, including subsidy reforms, containment of public-service benefits, lower spending on goods and services, and the introduction of a value added tax and excise taxes.

According to IMF, the decision of the (Persian) Gulf Cooperation Council Arab states (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman) to implement value-added tax from early 2018 will benefit Qatar and the other (P)GCC countries. Revenue from value-added tax at a rate of 5% could help Qatar generate additional revenue of about 1.5 percentage points of non-hydrocarbon GDP a year.

Qatar has already taken actions to ensure its smooth and timely implementation. These include establishing a separate and independent tax authority, and recruiting experts to help with the design and implementation of the VAT.

Another decision by Qatar to levy excise duty on tobacco and sugary drinks measure is estimated to yield about 0.2% of non-hydrocarbon GDP in revenue. This is in line with a (P)GCC-wide agreement.

Economists have already indicated that there was “room for increasing and broadening” the base of existing taxes in Qatar, especially the corporate income tax.

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