DOHA: Qatar’s GDP growth is expected to grow at 2.6 per cent in 2018, said the International Monetary Fund (IMF), noting that the country’s medium-term macro-financial outlook will remain broadly favourable.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.
Tariffs of some utilities (water and electricity) have been increased and domestic fuel prices are now adjusted regularly in line with movements in international prices. The financial system remains sound. An infrastructure program in the amount of $200 billion (equivalent to 121 per cent of 2017 GDP) is underway to diversify the economy and prepare for the FIFA 2022 World Cup.
The direct economic and financial impact of the diplomatic rift between Qatar and some countries in the region is fading. While economic activity was affected, this has been mostly transitory and new trade routes were quickly established. The banking system has also adjusted. Following the rift, foreign financing (non-resident deposits and inter-bank placements) and resident private sector deposits fell by about $40 billion.
This decline has been offset by liquidity injections by the central bank and public-sector deposits, particularly from Qatar Investment Authority (QIA). The decline in non-resident liabilities of banks has abated, obviating the need for further support of the Qatar Central Bank (QCB) and QIA to the banking system, as banks mobilize funding from other (non-GCC) sources. High frequency financial indicators, following the initial deterioration, are improving. The pegged exchange rate regime remains sustainable and the authorities have launched an investigation into possible exchange and bond markets manipulation in the wake of the rift. Macroeconomic performance remains resilient. Non-hydrocarbon real GDP growth is estimated to have moderated to about 4 per cent in 2017, reflecting on-going fiscal consolidation and the impact of the diplomatic rift. A self-imposed moratorium on new projects in the North Oil Field until the second quarter of 2017 and the OPEC+ deal had restrained the growth of hydrocarbon output, resulting in overall real GDP growth of 2.1 per cent in 2017. Headline inflation remains subdued, primarily due to lower rental prices.
