Country Report Qatar October 2017

Country Report Qatar October 2017

  • October 2017 •
  • Report ID: 325917 •
  • Format: PDF

Outlook for 2018-22



  • The boycott of Qatar by its Arab neighbours, which we expect to last until at least 2021, will weaken the emir's position, particularly if it harms Qatari citizens' welfare, which could spark domestic opposition to his rule.
  • Deep distrust between Qatar and its neighbours means that it is unlikely to downgrade ties with Turkey and Iran, or fully abandon its Islamist allies.
  • Weakening business sentiment in the first half of the forecast period will derail some economic diversification plans and deepen the emirate's reliance on hydrocarbons for fiscal revenue and export receipts.
  • The government will seek to shield citizens from economic pain arising from the boycott by boosting current spending. This will derail efforts to curb current spending and some capital expenditure will be cut in 2018-21.
  • Real economic growth will remain weak under the boycott, averaging 1.7% a year in 2018-21, owing to the impact of the dispute on the non-oil economy. Growth should pick up thereafter in line with an improved political outlook.
  • We do not expect the boycott to lead to severe disruption of natural gas exports and, consequently, the impact on the external sector will be less pronounced. On average, the current account will remain broadly in balance.


Review



  • The chief of the Al Murrah tribe has said that the Qatari authorities have revoked his citizenship along with others in his family. The regime is hostile to domestic opposition and will become even more so under the boycott.
  • Qatar witnessed a small deflation of 0.4% year on year in August. Falling food prices and rentals in Qatar underpin the price falls that month. Newly established maritime links with Oman, Turkey and Iran (among others) will minimise the risk of food price rises under the boycott.
  • Qatar Exchange witnessed volatility in September, indicative of negative market sentiment. Financial markets appear to be taking a more negative view of the boycott's impact on Qatar in recent weeks.
  • Banking sector data for August showed a steady outflow of non-resident deposits, albeit at a slower rate than in previous months. Despite the slowdown, our concerns about the health of the banking sector have not dissipated and risks surrounding banks' ability to provide future credit persist.
  • Real GDP data for the second quarter of 2017 showed a marked year-on-year slowdown to 0.6%. This covers the early stage of the boycott-which was launched on June 5th. However, third-quarter data-likely to be released by year-end-will provide a more representative picture of the boycott's effects.


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