Qatar’s Resilient Model: Bigger Opportunity in Bilateral Terms
Qatar British Business Forum (QBBF) hosted a luncheon session recently at Four Seasons Hotel Doha, attended by key dignitaries and professionals from the country’s top corporations. The opening remarks were given by QBBF Chairman Emad Turkman, while keynote speaker, Dr R Seetharaman of Doha Bank discussed the impact of the ongoing blockade on Qatar’s financial sector a year on.
According to Dr Seetharaman, who also spoke on the global economy, advanced economic growth is expected to remain above trend at 2.4% in 2018 before easing to 2.2% in 2019. The forecast for 2018 is lower, largely reflecting greater-than-expected growth moderations in the Euro area and Japan.
In the United States, near-term momentum in the economy is expected to strengthen with growth projected at 2.9% in 2018 and 2.7% in 2019. Growth in Germany, France and Italy was revised lower for 2018 amongst the European economies. Growth in Japan and the UK was also revised lower for 2018, while forecasts for India, Brazil and Mexico were lowered for 2018 by the International Monetary Fund (IMF) in their July 2018 report.
IMF expects Qatar to report a GDP growth of 2.6% and 2.7% in 2018 and 2019, respectively. Qatar’s banking system needs no further support from the central bank and sovereign wealth fund as the decline in non-resident liabilities of lenders have subsided.
As per Moody’s, Qatar injected US$38.5 billion of its US$340 billion reserves into economy to cushion the impact of embargo. Qatar has also made alternate arrangements for supplies, the Omani port was used for shipping supplies and Doha’s own port was also opened successfully.
The 2018 budget assumes the same conservative oil price of US$45 per barrel as used for the 2017 budget. Revenue reach QAR175.1 billion, up by 2.9%, compared with 2017, mainly due to an expected increase in non-oil revenue. Spending is expected to total QAR203.2 billion (US$55.8 billion), up 2.4% from the budget plan for 2017, with the deficit declining 1.1% to QAR28.1 billion.
The deficit will be financed through the issuance of debt. Total allocations for health, education and transportation reached QAR83.5 billion or 41% of total expenditure. Allocations for the health sector were QAR22.7 billion, representing 11.2% of the total expenditure in 2018.
The education sector is witnessing a major expansion with a total allocation of QAR19.0 billion in the 2018 budget, up by 19% compared to 2017. The transportation and other infrastructure projects were assigned the largest share in the 2018 budget with allocations of QAR42.0 billion, 21% of total expenditure.
Major projects will have a whopping QAR93 billion set apart in Qatar’s budget for 2018.
Fitch ratings recognised support of Qatari authorities for the banking system in Qatar. The government has demonstrated a strong commitment to its banks and key public sector companies, which has been reaffirmed during this crisis. Qatar had shown buoyancy in times of crisis and this upgrade was testament of its fundamental strength.’
In response to the economic blockade Qatar has emerged strong and has brought various reforms to transform itself into a self-reliant economy. Some of these reforms include the landmark residency bill, less strict entry visa requirements for citizens of 80 countries, and an enhanced food security programme. Qatar will also raise its LNG production by 30% to 100 mtpa within five to seven years after lifting a moratorium on gas development earlier in 2017.
Dr Seetharaman also spoke about the UK Economy.
IMF revised the UK economy to grow lower by 1.4% in 2018 and pick up to 1.5% in 2019. IMF expects the UK to report current account deficit of 3.8% and 3.4% in 2018 and 2019, respectively. The total bilateral trade between Qatar and UK amounted to £5 billion in 2016. There are more than 79 UK companies operating in the field of oil and gas, infrastructure and information technology. UK can be partner in Qatar’s FIFA 2022 World Cup projects, especially in stadium and cyber security. Qatar’s resilient model is a bigger opportunity in bilateral terms.