## cr18135 - 2.1 percent in 2017. Headline inflation remains subdued, primarily due to lower rental prices.

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### Recent developments: growth, inflation, and real estate
- Real GDP (2013 prices) growth: 2.1 percent in 2017.
- CPI inflation (average): 0.4 percent in 2017; headline inflation reached 0.8 percent in February (year-on-year basis).
- Real estate price index: fell by 11 percent in 2017 (year-on-year basis) after a cumulative increase of 53 percent during 2013–16.
- Nonhydrocarbon growth: 4.0 percent in 2017.
- Hydrocarbon output: hydrocarbon growth estimated at 0.2 percent in 2017.

### Near-term outlook and risks
- Growth and inflation projections:
  - Overall GDP growth projection for 2018: 2.6 percent.
  - Growth envisaged to average about 2.7 percent during 2019–23.
  - Inflation projection: expected to peak at 3.9 percent in 2018 before easing to 2.2 percent in the medium term.
- Key drivers and buffers:
  - Availability of significant external and fiscal buffers.
  - Strong financial sector.
- Downside risks:
  - Lower-than-envisaged oil prices.
  - Tighter global conditions (including U.S. monetary policy normalization).
  - An escalation of the diplomatic rift.

### Fiscal position and public finances
- Central government fiscal balance and trends:
  - Central government fiscal balance: estimated deficit of -6.0 percent of GDP in 2017.
  - Fiscal deficit narrowed to about 6 percent of GDP in 2017 from 9.2 percent in 2016.
- Revenues and expenditures (2017):
  - Total revenue: 26.3 (percent of GDP).
  - Expenditure: 32.4 (percent of GDP); Current expenditure 18.6 (percent of GDP); Capital expenditure 13.8 (percent of GDP).
- Public debt and financing:
  - Public debt: estimated at 54 percent of GDP as at end-2017; expected to fall to less than 40 percent in the medium term.
  - 2016 deficit financed by domestic borrowing and external financing (Qatar raised a total of US$14.5 billion of external debt in the same year); 2017 deficit financed mainly by domestic financing, supported by a surge in resident deposits (particularly government institutions).
- Non-hydrocarbon primary balance:
  - Estimated at about -31.4 percent of non-hydrocarbon GDP in 2017 (compared to -40.4 percent in 2016 and -57.3 percent in 2015).

### Banking sector and financial stability
- Key bank soundness indicators (as at end-September 2017 / 2017 where noted):
  - Capital adequacy ratio / Regulatory Tier 1 capital to risk-weighted assets: 15.4 percent (15.4 in 2017 table; Regulatory Tier 1 also listed as 15.4).
  - Return on assets: 1.6 percent.
  - Non-performing loans ratio: 1.5 percent.
  - Provisioning ratio of non-performing loans: 85 percent.
  - Liquid asset to total asset ratio: 27.3 percent.
- Liquidity and vulnerabilities:
  - Bank reserves have declined since 2015.
  - Loan concentration to contractors and real estate represents about a quarter of total domestic credit.
  - Recommended supervisory priorities: strengthen macroprudential regulation and consolidated supervision; improve liquidity monitoring and forecasting; continue to strengthen the AML/CFT framework and address identified gaps.
- Stress testing results (summary):
  - Under a very severe shock: NPLs would rise to about 9 percent and CAR would drop to 15 percent two years after the shock.
  - Under a severe stress scenario (oil price dropping to US$25 per barrel and private sector nonoil activity contracting by 3 percent a year for three years): aggregate CAR would stay above the 10 percent prudential minimum, but 2 banks would fall below the regulatory minimum two years after the shock.

### Current account, reserves, and external position
- Current account developments:
  - Current account moved to a deficit in 2016, reaching 5.5 percent of GDP (deficit).
  - Current account surplus of about 1.3 percent of GDP estimated for 2017.
- Reserves and buffers:
  - International reserves fell to about US$15 billion at end-December 2017.
  - International reserves increased in early 2018 to US$18 billion by end-January / end-February 2018.
  - QIA assets estimated about US$300 billion in 2017 provide an additional buffer.
- External assessment:
  - Staff assessment: external position is moderately weaker than the level consistent with sufficient saving of Qatar’s exhaustible resource revenue; sustaining baseline fiscal plans over the longer term would close the estimated current account gap.
  - PIH/ES finding: for 2017, the gap with the current account required to provide a constant real income per capita is estimated at about 4.3 percentage points of GDP, narrowing to around 3.4 percentage points over the medium term.

### Macroeconomic projections and scenarios (selected)
- Growth:
  - 2018: 2.6 percent.
  - 2019–23 average: about 2.7 percent.
- Inflation:
  - 2018: 3.9 percent (peak with VAT introduction).
  - Medium term: 2.2 percent.
- Fiscal and external balances:
  - Fiscal deficit narrowed to -1.4 percent of GDP in 2018 under baseline.
  - Non-hydrocarbon primary deficit as a ratio of non-hydrocarbon GDP: about 30 percent in 2018 (compared to 31.4 percent in 2017).
  - Current account projected surplus: about 2.5 percent of GDP in 2018.
- Alternative and stress scenarios:
  - Alternative fiscal scenario (assumptions: current expenditures/GDP constant during 2017–2023; higher capital expenditure ratio; VAT revenue excluded) implies higher revenues/expenditures/debt trajectories compared with baseline.
  - EBA-Lite and EBA-Oil results show large residuals; EBA-Oil suggests a smaller CA gap (~1 percent of GDP) for 2017.

### Policy recommendations — fiscal, structural, and monetary
- Fiscal policy recommendations:
  - Continue gradual fiscal consolidation to ensure sufficient saving of hydrocarbon wealth for future generations.
  - Enhance non-oil revenue, including putting in place a VAT and excises; staff estimate VAT at a rate of 5 percent would bring additional revenue of about 1.2 percentage points of GDP per year.
  - Strengthen expenditure control, emphasize public-service reform, and accelerate reform of public utility companies.
  - Implement wage reform to reduce the public to private wage gap (public-to-private wage gap: 171 percent).
  - Further enhance the medium-term fiscal framework with a clear medium-term objective and improve reporting of fiscal accounts.
- Structural and diversification recommendations:
  - Enhance economic diversification and private sector development.
  - Continue labor law reform, privatization, special economic zones, and increased foreign ownership limits—while avoiding import-substitution strategies, special tax incentives, or labor policies that might cause market distortions.
  - Improve business environment: contract enforcement and insolvency mechanism reform.
  - Enact laws promoting equal remuneration and discouraging gender-based discrimination to support inclusive growth.
- Monetary/exchange rate view:
  - The currency peg to the U.S. dollar continues to serve Qatar well as a clear and credible monetary anchor.
  - The exchange rate regime should be reviewed periodically to ensure continued appropriateness as the economy diversifies.
- Financial sector and market development:
  - Deepen domestic government and corporate bond markets; adopt a stable, predictable, and transparent issuance policy; publish a Medium-Term Debt Management Strategy.
  - Enhance liquidity forecasting, coordinate information sharing between government, QCB, and QIA, and periodically revisit macroprudential measures.
  - Advance capacity to address FinTech-related challenges and close AML/CFT gaps ahead of the 2019 assessment.

### Key statistics (selected table values, 2014–19 and related series)
- Real GDP (2013 prices): 2014: 4.0; 2015: 3.6; 2016: 2.2; 2017: 2.1; 2018: 2.6; 2019: 2.7.
- CPI inflation (average): 2014: 3.4; 2015: 1.8; 2016: 2.7; 2017: 0.4; 2018: 3.9; 2019: 3.5.
- Central government fiscal balance (percent of GDP): 2014: 12.3; 2015: 1.3; 2016: -9.3; 2017: -6.0; 2018: -1.4; 2019: 3.4.
- Broad money growth (2017): 21.3 percent.
- Credit to private sector growth (2017): 6.4 percent.
- Current account balance in percent of GDP: 2017: 1.3; 2018: 2.5; 2019: 1.8.
- Central bank reserves (excluding QIA assets), 2017: 14.9 (in months of imports: 2.5).
- Nominal GDP (billions of Qatari Riyals): 2017: 605.4; proj. 2018: 669.1.
- Exports (billions of U.S. dollars): 2017: 65.1; proj. 2018: 75.9.
- Total government debt (percent of GDP, Table 3b memorandum): 2017: 54.0; projected 2018: 55.4; 2019: 52.0.
- Central bank net reserves (US$ billion, Table 4): 2017: 14.5.
- Public sector gross nominal debt (percent of GDP, DSA baseline): 2017: 46.5; 2018: 54.0; 2019: 55.4; 2020: 52.0.

### Staff appraisal and recommended priorities
- Economic resilience and outlook:
  - Qatar has successfully absorbed shocks from lower hydrocarbon prices due to fiscal and external buffers, prudent fiscal policy, and a sound financial sector.
  - Infrastructure programs and expected increase in LNG production capacity will support medium-term growth.
- Priorities:
  - Continue gradual fiscal consolidation while preserving growth-friendly spending.
  - Implement simplified VAT and excises to advance revenue diversification.
  - Strengthen expenditure control, medium-term fiscal frameworks, and fiscal reporting.
  - Maintain vigilance on asset quality amid softening real estate prices and enhance liquidity monitoring and forecasting.
  - Advance structural reforms (labor law, privatization, SEZs, foreign ownership) while avoiding market-distorting incentives.

*Italic: International Monetary Fund staff report: QATAR — STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION (cr18135).*

### 2.1 percent in 2017. Headline inflation remains subdued, primarily due to lower rental prices.

### cr18135 - 2.1 percent in 2017. Headline inflation remains subdued, primarily due to lower rental prices.

### Recent developments: growth, inflation, and real estate
- Real GDP (2013 prices) growth: 2.1 percent in 2017.
- CPI inflation (average): 0.4 percent in 2017; headline inflation reached 0.8 percent in February (year-on-year basis).
- Real estate price index: fell by 11 percent in 2017 (year-on-year basis) after a cumulative increase of 53 percent during 2013–16, reflecting increased supply of new properties and reduced effective demand.
- Nonhydrocarbon growth: 4.0 percent in 2017 (table).
- Hydrocarbon output: hydrocarbon growth estimated at 0.2 percent in 2017 (table).

### Near-term outlook and risks
- Overall GDP growth projection for 2018: 2.6 percent.
- Inflation projection: expected to peak at 3.9 percent in 2018—driven largely by the impact of the value-added tax being introduced during the second half of 2018—before easing to 2.2 percent in the medium term.
- Outlook drivers and buffers:
  - Availability of significant external and fiscal buffers.
  - Strong financial sector.
- Downside risks highlighted:
  - Lower-than-envisaged oil prices.
  - Tighter global conditions.
  - An escalation of the diplomatic rift.

### Fiscal position and public finances
- Central government fiscal balance: estimated deficit of -6.0 percent of GDP in 2017 (table).
- Fiscal deficit trend: narrowed to about 6 percent of GDP in 2017 from 9.2 percent in 2016 (text).
- Total revenue: 26.3 (percent of GDP) in 2017 (table).
- Expenditure: 32.4 (percent of GDP) in 2017 (table); Current expenditure 18.6 (percent of GDP) and Capital expenditure 13.8 (percent of GDP) in 2017 (table).
- Public debt: estimated at 54 percent of GDP as at end-2017; expected to fall to less than 40 percent in the medium term (text).
- Financing: 2016 deficit financed by domestic borrowing and external financing (Qatar raised a total of US$14.5 billion of external debt in the same year); 2017 deficit financed mainly by domestic financing, supported by a surge in resident deposits (particularly government institutions).
- Non-hydrocarbon primary balance: estimated at about -31.4 percent of non-hydrocarbon GDP in 2017 (compared to -40.4 percent in 2016 and -57.3 percent in 2015).

### Banking sector and financial stability
- Bank capitalization and soundness (as at end-September 2017):
  - Capital adequacy ratio: 15.4 percent.
  - Return on assets: 1.6 percent.
  - Non-performing loans ratio: 1.5 percent.
  - Provisioning ratio of non-performing loans: 85 percent.
- Liquidity indicators:
  - Liquid asset to total asset ratio: 27.3 percent.
  - Bank reserves have declined since 2015 (text).
- Vulnerabilities and supervisory priorities:
  - Loan concentration in the real estate sector amid softening property prices warrants vigilance.
  - FinTech developments will require additional regulatory capacity.
  - Recommended improvements: strengthen macroprudential regulation and consolidated supervision; improve liquidity monitoring and forecasting; continue to strengthen the AML/CFT framework and address identified gaps.

### Executive Directors’ assessment and policy recommendations
- Broad endorsement:
  - Considerable buffers and sound macroeconomic policies helped Qatar absorb shocks from lower hydrocarbon prices and the diplomatic rift.
  - Authorities’ commitment to prudent economic and financial policies is important to sustain resilience and promote diversified and inclusive growth.
- Fiscal policy recommendations:
  - Continue gradual fiscal consolidation to ensure sufficient saving of hydrocarbon wealth for future generations.
  - Enhance non-oil revenue, including putting in place a VAT and excises.
  - Strengthen expenditure control, emphasize public-service reform, and accelerate reform of public utility companies.
  - Implement wage reform to reduce the public to private wage gap.
  - Further enhance the medium-term fiscal framework with a clear medium-term objective.
  - Improve reporting of fiscal accounts to strengthen accountability, transparency, and policy effectiveness.
- Structural and diversification recommendations:
  - Enhance economic diversification and private sector development.
  - Continue labor law reform, privatization, special economic zones, and increased foreign ownership limits—while avoiding import-substitution strategies, special tax incentives, or labor policies that might cause market distortions.
  - Improve business environment: contract enforcement and insolvency mechanism reform.
  - Enact laws promoting equal remuneration and discouraging gender-based discrimination to support inclusive growth.
  - Continue to enhance macroeconomic statistics.
- Monetary/exchange rate view:
  - The currency peg to the U.S. dollar continues to serve Qatar well as a clear and credible monetary anchor.
  - The exchange rate regime should be reviewed periodically to ensure continued appropriateness as the economy diversifies.

### Key statistics (selected table values, 2014–19)
- Real GDP (2013 prices): 2014: 4.0; 2015: 3.6; 2016: 2.2; 2017: 2.1; 2018: 2.6; 2019: 2.7.
- CPI inflation (average): 2014: 3.4; 2015: 1.8; 2016: 2.7; 2017: 0.4; 2018: 3.9; 2019: 3.5.
- Central government fiscal balance (percent of GDP): 2014: 12.3; 2015: 1.3; 2016: -9.3; 2017: -6.0; 2018: -1.4; 2019: 3.4.
- Broad money growth: 2017: 21.3 percent; credit to private sector growth: 2017: 6.4 percent.
- Current account balance in percent of GDP: 2017: 1.3; 2018: 2.5; 2019: 1.8.
- Central bank reserves (excluding QIA assets), 2017: 14.9 (in months of imports: 2.5).

*International Monetary Fund staff report: QATAR — STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION (April 12, 2018).*

### 6.       The current account is improving in the context of increased oil and gas prices

### 6.       The current account is improving in the context of increased oil and gas prices

### Current account, oil prices, and reserves
- The current account moved to a deficit in 2016, reaching 5.5 percent of GDP.
- A current account surplus of about 1.3 percent of GDP is estimated for 2017, as oil prices recovered and imports fell due to lower non-hydrocarbon growth.
- International reserves fell in response to capital outflows associated with the unprecedented diplomatic rift, reaching about US$15 billion at end-December 2017.
- International reserves increased in early 2018, reaching US$18 billion by end-January.

### Monetary conditions and credit
- Qatar Central Bank (QCB) has increased the domestic policy rate broadly in line with the U.S. Federal Reserve, culminating in increased inter-bank interest rates.
- Private sector credit growth was 6.4 percent y-o-y in January 2018 and has kept pace with or slightly exceeded that of nominal non-oil GDP.
- Monetary conditions have tightened.

### Banking sector health and vulnerabilities
- Banking sector metrics as at end-September 2017:
  - Capital adequacy ratio: 15.4 percent
  - Return on assets: 1.6 percent
  - Non-performing loans ratio: 1.5 percent
  - Provisioning ratio of non-performing loans: 85 percent
- Liquidity: liquid asset to total asset ratio of 27.3 percent, though bank reserves have declined since 2015.
- Concentration of lending risk: lending to contractors and real estate represents about a quarter of total domestic credit; downward trend in real estate prices needs monitoring.
- Staff assessment: external position is moderately weaker than the level consistent with sufficient saving of Qatar’s exhaustible resource revenue (Annex II), but with gradual fiscal adjustment the estimated current account gap could be closed in the medium term.
- Reserves are considered broadly adequate in view of the size of the sovereign wealth fund (Qatar Investment Authority, QIA).

### Macroeconomic outlook (medium term) — projections and assumptions
- Growth:
  - Overall GDP growth projected for 2018: 2.6 percent.
  - Growth envisaged to average about 2.7 percent during 2019–23, supported by authorities’ intention to increase liquefied natural gas (LNG) production capacity by about 30 percent.
  - Non-oil growth moderated to 4 percent annually in the medium term due to tapering of public investment growth.
- Inflation:
  - Expected to peak at 3.9 percent in 2018 (as the impact of VAT introduced during the second half of 2018 is mostly felt that year).
  - Expected to ease to 2.2 percent in the medium term.
- Fiscal and external balances:
  - Fiscal deficit narrowed to -1.4 percent of GDP in 2018 due to continued expenditure restraint, higher oil prices, and introduction of VAT.
  - Non-hydrocarbon primary deficit as a ratio of non-hydrocarbon GDP: about 30 percent in 2018 (compared to 31.4 percent in 2017).
  - Current account position projected to remain in surplus of about 2.5 percent of GDP in 2018 due to higher oil prices.
  - Over the medium term, current account and fiscal position projected to be in modest surplus in line with hydrocarbon price evolution.
- Risks to credit and non-hydrocarbon activity:
  - Ongoing diplomatic rift and further U.S. monetary policy normalization could dampen private sector credit growth, moderating non-hydrocarbon expansion.

### Main risks — external and domestic
- External risks:
  - Lower hydrocarbon prices could be amplified by macro-financial linkages: weaker government spending → slower non-oil growth → weaker credit growth → potential deterioration in bank loan portfolios. Government financial assets would help contain adverse implications.
  - Tighter global financial conditions could raise funding costs and market risks for the sovereign and banks.
  - Escalation of the diplomatic rift could weigh on confidence and access to external credit and growth; additional government liquidity injections would be required if access is impaired.
  - Authorities’ stress tests indicate banks would maintain high capital adequacy ratios under severe and protracted shocks; banks’ balance sheets and financial buffers are judged sufficient to provide additional support if needed.
- Domestic risks:
  - Delayed implementation of key fiscal measures could produce a higher fiscal deficit, current account deficit, and public debt.
  - Alternative fiscal scenario described (assumptions: current expenditures/GDP constant during 2017–2023; higher capital expenditure ratio; VAT revenue excluded) implies higher revenues/expenditures/debt trajectories compared with baseline (charts referenced).

### Non-financial corporate sector (Box 2) — performance and vulnerabilities
- Size and structure (2016):
  - Total turnover: US$28 billion (about 18 percent of total GDP and one-quarter of non-hydrocarbon GDP).
  - Assets of listed and non-listed NFCs: about 115 percent of non-hydrocarbon GDP.
  - Sector concentration: services represent more than 81 percent of total NFC assets; manufacturing and primary sectors combined represent 19 percent.
- Profitability and resilience:
  - Profitability declined since 2012; NFCs remain profitable but experienced declines in 2015–16.
  - Stress tests indicate NFC sector is resilient to funding and earnings shocks.
  - Baseline median interest coverage ratio (ICR) in 2016: 7.6; ICR falls under stress but remains above the debt-at-risk threshold of ICR = 1 in all scenarios except the most severe.
  - Corporates’ debt-at-risk and firms at risk remain limited under all but the most severe scenario.

### Policy discussions — achieving intergenerational equity and fiscal reform
- Fiscal anchor and intergenerational equity:
  - The non-hydrocarbon primary balance consistent with intergenerational equity (PIH-based) is the appropriate fiscal anchor for Qatar.
  - Estimated gap between PIH-derived non-hydrocarbon primary balance and actual non-hydrocarbon primary balance in 2017: about 6 percentage points of non-hydrocarbon GDP.
  - Gradual fiscal consolidation is recommended given significant policy space (large fiscal and external buffers; accumulated savings represent around 334 percent of the stock of government debt in 2017 and cover more than 112 times the projected fiscal deficit for 2018).
- Authorities’ planned composition of adjustment and key elements:
  - Baseline incorporates further fiscal consolidation, including:
    - Limiting growth of the public wage bill and expenditure on goods and services (generating about 2 percentage points of GDP in the medium term).
    - Reduced public investment (from about 14 percent of GDP in 2017 to 9 percent in 2023, similar to the ratio in 2013) as 2022 World Cup related projects reach completion.
  - VAT:
    - Authorities plan VAT implementation by the second half of 2018.
    - Staff’s estimate: VAT at a rate of 5 percent would bring additional revenue of about 1.2 percentage points of GDP per year (incorporated in the baseline).
    - Potential technical challenges (implementing regulation, IT integration) could delay VAT introduction.
  - Wage reform:
    - Public-to-private wage gap: 171 percent.
    - Staff recommended initial reductions via tightening eligibility for allowances and reducing staff size by natural attrition; broader public sector employment restructuring should be gradual and coordinated with education and labor market reforms.
  - Energy and water price reform:
    - Direction of reforms considered appropriate: gradual reduction of energy subsidies while protecting vulnerable segments.
    - Utility companies have a 10-year plan to achieve full market-price commercialization; staff encouraged a more accelerated reform plan to capture efficiency benefits sooner.
- Authorities’ views:
  - Broad agreement with staff’s outlook and risks.
  - Authorities emphasized efforts to decouple government expenditures from oil and gas prices, potential for higher growth from enhanced domestic food production and tourism, possible lower inflation in 2018, and potential for lower imports and higher reserves in months of imports relative to staff projections.
  - Authorities judged the macroeconomic and financial impact of the diplomatic rift to be contained given significant external and fiscal buffers and a strong financial sector.

*IMF staff summary of Section 6 content.*

### 15.      Fiscal efforts should continue to be guided by a medium-term fiscal framework

### 15.      Fiscal efforts should continue to be guided by a medium-term fiscal framework

### Medium-term fiscal framework, budgeting, and public expenditure management
- Staff welcomed the formulation of a medium-term fiscal framework (MTFF) by the authorities, with key macroeconomic assumptions.
- Priority actions:
  - Prepare a medium-term budget framework (MTBF) by matching the MTFF with a bottom-up estimation of the costs of existing policy and integrating the MTBF in the annual budget process.
  - Gradually turn the MTBF into a performance based medium-term expenditure framework (MTEF).
  - Strengthen monitoring of public expenditures, particularly capital spending, to improve efficiency.
  - Enhance fiscal reporting (frequency, timeliness, and analysis), including government financial transactions, to strengthen accountability and transparency.
- Capacity and technical assistance:
  - Authorities emphasized that enhanced capacity and technical assistance from the Fund could be required to move to a medium-term budget framework and performance-based budgeting system.
  - Authorities reported progress in establishing the Macro-Fiscal Unit and initiatives of the public investment unit to improve public investment efficiency.
- Revenue-side note (from source footnote):
  - Removal of subsidies on electricity and gas would yield additional revenue of about 4 percent of non-hydrocarbon GDP in Qatar.

### Asset-liability management and reserve buildup
- Staff and authorities agreed an enhanced asset-liability management framework remains important to guide deficit financing and to avoid crowding out private sector credit growth.
- The framework should consider macro-financial implications, including the impact on debt sustainability, domestic liquidity, credit to the economy, and central bank reserves.
- Authorities plan to use future fiscal surpluses to:
  - Build up the reserves of QCB.
  - Increase asset holdings of QIA.
- Staff emphasized the importance of enhancing QCB’s reserves despite QIA’s substantial assets.
- Reported reserve levels:
  - QCB foreign exchange reserves increased from US$15 billion as at end-2017 to US$18 billion as at end-February 2018.

### Maintaining financial stability, liquidity management, and supervision
- Liquidity management and forecasting:
  - QCB has managed liquidity appropriately, reflected by low variability in interbank rates.
  - Emphasis on greater coordination and information sharing between the central government, QCB, and QIA.
  - Recommendation: develop a liquidity forecasting framework to improve timing and sizing of liquidity operations and enhance market analysis capability and coverage of the balance of payments; improve clarity of government transfers in and out of the sovereign wealth fund.
- Prudential and supervisory framework:
  - Banks are under Basel III regulations for capital, liquidity, and leverage and meet regulatory standards, even under shock scenarios.
  - New loan-to-deposit requirement: 100 percent, effective January 2018, to improve liquidity profile and asset quality.
  - Recommendation: periodically revisit macroprudential measures (real estate exposure limits, loan-to-value, loan-to-deposit ratios) and recalibrate to ensure countercyclicality.
  - Recommendation: QCB should undertake an impact study of Basel IV on banks’ capital adequacy ratios to inform implementation speed.
  - FinTech: presents regulatory challenges and opportunities; requires enhanced capacity.
- Real estate sector vigilance:
  - Real estate price index fell by about 10 percent in 2017 (year-on-year) following cumulative increase of 53 percent during 2014–16.
  - Although banks have substantial loss absorption capacity, a sharper decline in property prices presents risk given sizable banking exposure to real estate.
  - Recommendation: enhanced real estate statistics to facilitate monitoring.
- Resilience and stress testing (Box 3 summary):
  - Stress test results indicate Qatari banks can withstand very severe macroeconomic shocks.
  - Under the shock scenario:
    - NPLs would rise to about 9 percent.
    - CAR would drop to 15 percent two years after the shock.
  - Under the severe stress scenario (oil price dropping to US$25 per barrel and private sector nonoil activity contracting by 3 percent a year for three years):
    - Aggregate CAR would stay above the 10 percent prudential minimum, but 2 banks would fall below the regulatory minimum two years after the shock.
  - QCB’s 2016 Financial Stability Report: NPLs of 18 percent lead to a drop in aggregate CAR to 12.5 percent.

### Financial market development, debt management, and financial integrity
- Financial market deepening and policy recommendations:
  - Deepen domestic government and corporate bond markets to support non-hydrocarbon private sector growth.
  - Improve functioning and liquidity of local government securities market and develop a reliable yield curve to aid monetary policy transmission and liquidity management.
  - Adopt a stable, predictable, and transparent issuance policy.
  - Publish a Medium-Term Debt Management Strategy to provide longer-term vision for debt market development, issuance plans, and reduce investor uncertainty.
  - Banks should enhance deposit mobilization and diversify funding sources.
- AML/CFT and financial integrity:
  - Authorities are implementing mechanisms for targeted financial sanctions and managing risks from non-profit organizations; priority to combating terrorist financing legal framework and national risk assessment.
  - Efforts supported by Fund and other technical assistance.
  - Recommendation: proactively close identified gaps in AML/CFT framework in preparation for the forthcoming AML/CFT assessment scheduled for 2019.

### Private sector development, competitiveness, and statistics
- Competitiveness and business environment:
  - Qatar ranks 25th (out of 137) in the World Economic Forum’s Global Competitiveness Index (2017–18).
  - World Bank’s Ease of Doing Business Index ranks Qatar at 83 out of 190 countries.
  - Areas for improvement include access to credit, contract enforcement, and insolvency mechanism.
- Structural reform agenda:
  - Diplomatic rift has catalyzed efforts to enhance domestic food production; staff recommended avoiding import-substitution policies and instead tapping regional and global value chains.
  - Privatization initiatives in health and education are positive.
  - Authorities plan to set up special economic zones (SEZs) to stimulate diversification and FDI; staff urged careful design of incentives and labor policies to avoid market distortions and to consider reductions in fiscal dependence on hydrocarbons.
  - Other measures: visa-free entry program for 80 nationalities, draft law for permanent residency for foreigners who provide “outstanding services to Qatar”, worker dispute settlement committee, and a trust fund for workers facing bankruptcy.
  - Authorities considering establishing a minimum wage under the ILO framework and a new law to protect expatriate domestic workers.
- Gender and labor participation:
  - Female literacy about 98 percent in 2014.
  - Female labor force participation about 37 percent.
  - Recommendation: laws mandating equal remuneration and discouraging gender-based discrimination to promote equality and support Qatar’s National Vision 2030.
- Macroeconomic statistics and data dissemination:
  - Progress: conducting a quarterly investment survey, compiling fiscal data according to GFSM 2001, and subscribing to the SDDS.
  - QCB intends to compile and disseminate the Reserves Data Template fully in line with the Guidelines for a Data Template.
  - Recommendation: accelerate dissemination of financing components of central government operations, central government domestic debt, and external debt; authorities committed to addressing remaining data gaps for SDDS subscription.

### Staff appraisal — key conclusions and recommendations
- Economic resilience and outlook:
  - Qatar has successfully absorbed shocks from lower hydrocarbon prices due to fiscal and external buffers, prudent fiscal policy, and a sound financial sector.
  - Infrastructure programs and expected increase in LNG production capacity will support medium-term growth.
- Fiscal policy and reforms:
  - Ample fiscal space exists to continue gradual fiscal consolidation and save hydrocarbon wealth for future generations.
  - Fiscal reforms should address spending and revenue inefficiencies to make room for growth-friendly expenditure.
  - Implement a simplified VAT and excises to lay the foundation for an efficient tax system and advance revenue diversification.
  - Strengthen expenditure control—contain wages and public service benefits, social transfers, and remaining subsidies—to generate additional savings and improve efficiency.
  - Enhance the medium-term fiscal framework with a clear medium-term objective, introduce a medium-term budget framework, and move toward a performance-based budgeting system.
  - Improve fiscal accounts reporting in frequency, timeliness, and analysis to strengthen accountability and policy effectiveness.
- Financial sector:
  - Banks remain healthy with high asset quality and strong capitalization.
  - Pay increased attention to asset quality amid softening real estate prices.
  - Central bank should assess Basel IV impact to set an appropriate implementation speed.
  - Advance capacity to address FinTech-related challenges and opportunities.
  - Improve monitoring and forecasting in liquidity management to anticipate systemic pressures.
- Structural reforms for diversification:
  - Continue reforms on labor law, privatization, SEZs, and foreign ownership limits.
  - Avoid import-substitution strategies; ensure SEZ incentives and labor policies do not distort markets.
  - Enhance contract enforcement and insolvency reforms to boost private sector growth.
  - Adopt laws promoting equal remuneration and discouraging gender-based discrimination to support inclusive growth.
- Exchange rate regime:
  - The fixed exchange rate peg to the U.S. dollar remains appropriate as a monetary anchor.
  - Periodic review of the exchange regime is recommended as the economy diversifies.
  - Although external position is moderately weaker than the level consistent with adequate saving of exhaustible resource revenue, sustaining baseline fiscal plans over the longer term would close the estimated current account gap.

*Source: IMF country report chapter: “Fiscal efforts should continue to be guided by a medium-term fiscal framework.”*

### 32.      It is recommended that the next Article IV consultation take place on the standard

### 32.      It is recommended that the next Article IV consultation take place on the standard 12-month cycle.

### Real sector developments
- GDP growth composition:
  - Charts indicate a slowing contribution from the non-hydrocarbon sector relative to hydrocarbon sector (2013–2017 (est.)).
- Industrial production:
  - Industrial Production Index (2013=100) shows moderation with signs of recovery across Mining and quarrying and Manufacturing (2016Q1–2017Q3 series).
- Inflation:
  - Overall CPI and category contributions show subdued inflation (Year-on-Year CPI Growth Contributions, Jan-17 to Jan-18).
- Demand composition:
  - Reduced government consumption contributed to lower growth (Contributions to Real GDP Growth, 2013–2017 (est.)).
- Food prices:
  - Food Price Index (May 2014=100): Qatar and World series from Jan-13 to Jan-18 remain steady.
- Asset prices:
  - Real estate and stock market price indices have been declining (Real Estate and Stock Market Indices, Jan 2013=100).

### Fiscal developments
- Revenue composition and trends:
  - Central Government Revenues (Percent of GDP, 2013–2017 (est.)): Oil, LNG-related, Investment income 1/, Corporate tax revenue 2/, Other non-tax revenue shown; lower hydrocarbon revenues have led to reduced fiscal revenues.
  - Note: 1/ Dividends paid by Qatar Petroleum and other state-owned enterprises. 2/ About 85 percent of corporate income tax comes from Qatar Petroleum.
- Expenditure patterns:
  - Government maintained capital expenditure despite fiscal consolidation (Government Expenditure, 2013 and 2017, Percent of GDP).
  - Reduction observed in current expenditures (Central Government Expenditure, Percent of GDP, 2013–2017 (est.)).
- Debt issuance:
  - Government issuing debt to help develop capital markets; Central Government Debt (Percent of GDP, Domestic Debt and External Debt components, 2013–2017 (est.)).
- Table highlights (Table 3b, percent of GDP):
  - Revenue: 47.6 (2013), 45.7 (2014), 42.8 (2015), 30.7 (2016), 26.3 (2017), projected 28.9 (2018), 31.5 (2019).
  - Expenditure: 28.3 (2013), 33.4 (2014), 41.5 (2015), 39.9 (2016), 32.4 (2017), projected 30.4 (2018), 28.2 (2019).
  - Net lending (+)/borrowing (-): 19.3 (2013), 12.3 (2014), 1.3 (2015), -9.3 (2016), -6.0 (2017), projected -1.4 (2018), 3.4 (2019).
  - Adjusted nonhydrocarbon primary fiscal balance (pct of nonhydrocarbon GDP): -50.2 (2013), -57.8 (2014), -57.3 (2015), -40.4 (2016), -31.4 (2017), projected -29.9 (2018), -25.9 (2019).
  - Total government debt (percent of GDP, Table 3b memorandum): 30.9 (2013), 24.9 (2014), 34.9 (2015), 46.5 (2016), 54.0 (2017), projected 55.4 (2018), 52.0 (2019).

### External sector developments
- Commodity prices and energy:
  - Commodity Price Indices (Jan 2013=100): Avg. oil spot price increased recently; Natural gas price lagging.
- Trade and external balances:
  - Exports (Billions of QR) increased while decline in imports stabilized (series Apr-12 to Jan-18).
  - Non-oil export growth moderated (Contributions to Non-oil Export Growth, 2015–2016).
  - Import growth has fallen (Contributions to Import Growth, 2015–2016).
- Exchange rates and reserves:
  - Spot and 12M forward exchange rates under pressure (off-shore rates, Jan-13 to Jan-18).
  - REER depreciated recently in line with the U.S. dollar (NEER and REER Index, 2010=100).
  - Table 2 (Balance of Payments) highlights:
    - Current account (Billions of U.S. dollars): 60.5 (2013), 49.4 (2014), 13.8 (2015), -8.3 (2016), 2.1 (2017), proj. 4.7 (2018), 3.5 (2019), 3.0 (2020).
    - Trade balance: 101.9 (2013), 95.6 (2014), 48.8 (2015), 25.3 (2016), 31.0 (2017), proj. 38.1 (2018).
    - Exports (Billions USD): 133.3 (2013), 126.7 (2014), 77.3 (2015), 57.3 (2016), 65.1 (2017), proj. 75.9 (2018).
    - Central bank reserves (Billions USD, Table 2 memorandum): 42.2 (2013), 43.1 (2014), 37.2 (2015), 31.7 (2016), 14.9 (2017), proj. 19.6 (2018), 23.2 (2019).

### Financial sector developments
- Liquidity and monetary conditions:
  - Monetary tightening and non-resident deposit withdrawals led to a decline in excess reserves and more volatile liquidity conditions; public sector deposits and QCB injections helped mitigate effects.
  - Policy rates: Qatar (RHS) series compared to GCC peers and Fed Target Rate (Feb-2014 to Feb-2018).
  - Commercial Bank Assets with Central Banks: CD Holdings, Excess Reserves, Reserve Requirements (series Nov-07 to Nov-17).
- Banks' foreign asset/liability composition:
  - Qatari Banks: Foreign Assets Composition (QR billions, 2013–2017) including Due from banks abroad, Credit outside Qatar, Investments abroad, Cash and other assets; foreign to total assets (percent).
  - Qatari Banks: Foreign Liabilities Composition showing Non-resident deposits, Due to banks abroad, Debt securities, Other; foreign to total liabilities (percent).
- Credit and deposits:
  - Bank credit growth by sector (2013–2017): public sector, construction, real estate, other private sector, outside Qatar.
  - Domestic credit and deposit growth (annual percent change): Domestic credit 1/ and Resident deposits series (Jan-13 to Jan-18).
- Financial soundness (selected, Table 5):
  - Regulatory Tier 1 capital to risk-weighted assets: 15.4 (2017).
  - Nonperforming loans to total loans: 1.5 (2017).
  - Bank provisions to nonperforming loans: 85.0 (2017).
  - Return on assets: 1.6 (2017).
  - Liquid assets to total assets: 27.3 (2017).
  - Private sector loans (percent of total loans): 68.8 (2016).
- Monetary aggregates (Table 6):
  - Broad Money (Billions of Qatari Riyals): 455.7 (2013), 504.0 (2014), 521.4 (2015), 497.5 (2016), 603.3 (2017), proj. 636.8 (2018), 675.4 (2019).
  - Net foreign assets (Total): 106.6 (2013), 124.6 (2014), 47.1 (2015), -59.4 (2016), -74.5 (2017), proj. -62.0 (2018), -51.9 (2019).

### Labor market indicators
- Population and employment structure:
  - Fast population growth driven by expatriate worker inflows (Population Distribution, 2006–2016, Thousands).
  - Workers in paid employment increased in Construction and Non-Government services between 2012 and 2016 (Thousands).
- Wages and employment:
  - Public sector wage growth moderated (Real Monthly Average Wage, 2012–2016 annual percent change).
  - Wages and employment fell more recently following prior persistent increases (Average monthly wage and Number of paid workers, 2013Q2–2017Q2).
- Education:
  - Education Expenditure (Percent of GDP, latest available): Qatar 3.6 shown relative to peers; Yearsof schooling and Average math score (TIMSS, 2015) indicate room for improving education outcomes.

### Business environment and governance indicators
- Governance indicators (World Governance Indicators, 2017 percentile ranks):
  - Categories shown include Voice and Accountability, Political Stability, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption with Qatar and GCC comparisons.
- Competitiveness and Doing Business:
  - Global Competitiveness Index by Category (2017–18) and World Bank Doing Business (2018) ranks and detailed areas indicate strengths and areas for improvement (starting business, contract enforcement, investor protection).
- Infrastructure and electricity:
  - Quality of Electricity Supply (2016) and Quality of Infrastructure (2016) shown with high scores ("7 - meets the highest standards in the world").

### Key macroeconomic indicators (selected from Table 1: Qatar: Selected Macroeconomic Indicators, 2013–23)
- Nominal GDP (billions of Qatari Riyals): 723.4 (2013), 750.7 (2014), 599.3 (2015), 555.0 (2016), 605.4 (2017), proj. 669.1 (2018).
- Real GDP (2013 prices, change in percent): 4.4 (2013), 4.0 (2014), 3.6 (2015), 2.2 (2016), 2.1 (2017), proj. 2.6 (2018), 2.7 (2019).
- CPI inflation (average): 3.2 (2013), 3.4 (2014), 1.8 (2015), 2.7 (2016), 0.4 (2017), proj. 3.9 (2018), 3.5 (2019).
- Central government finances (percent GDP, Table 1):
  - Revenue: 47.6 (2013), 45.7 (2014), 42.8 (2015), 30.7 (2016), 26.3 (2017), proj. 28.9 (2018).
  - Expenditure: 28.3 (2013), 33.4 (2014), 41.5 (2015), 39.9 (2016), 32.4 (2017), proj. 30.4 (2018).
  - Central government fiscal balance: 19.3 (2013), 12.3 (2014), 1.3 (2015), -9.3 (2016), -6.0 (2017), proj. -1.4 (2018), 3.4 (2019).
- External sector (Table 1 highlights):
  - Exports (billions of U.S. dollars, hydrocarbon incl.): 133.3 (2013), 126.7 (2014), 77.3 (2015), 57.3 (2016), 65.1 (2017), proj. 75.9 (2018).
  - Imports (billions of U.S. dollars): -31.5 (2013), -31.1 (2014), -28.5 (2015), -31.9 (2016), -34.1 (2017).
  - Current account balance (billions USD): 60.5 (2013), 49.4 (2014), 13.8 (2015), -8.3 (2016), 2.1 (2017), proj. 4.7 (2018).

### Vulnerabilities and resilience indicators
- External solvency and reserves (Table 4):
  - Total debt (billion US$, including commercial banks): 97.9 (2013), 100.2 (2014), 121.6 (2015), 169.1 (2016), 146.4 (2017).
  - Total debt (percent of GDP): 49.3 (2013), 48.6 (2014), 73.8 (2015), 110.9 (2016), 88.0 (2017).
  - Central bank net reserves (US$ billion): 41.8 (2013), 42.7 (2014), 36.9 (2015), 31.4 (2016), 14.5 (2017).
  - In months of imports: 7.8 (2013), 8.6 (2014), 7.0 (2015), 5.7 (2016), 2.5 (2017).
- Public sector solvency (Table 4):
  - Government gross domestic debt/GDP: 20.6 (2013), 16.0 (2014), 22.7 (2015), 25.6 (2016), 36.0 (2017).
  - Government external debt/GDP: 10.3 (2013), 8.9 (2014), 12.2 (2015), 20.9 (2016), 18.0 (2017).
  - Interest payments/total revenue: 2.7 (2013), 2.6 (2014), 3.4 (2015), 4.8 (2016), 5.1 (2017).
- Market assessments:
  - Stock market index (end of period): 10378.6 (2013), 10379.6 (2014), 12285.8 (2015), 10313.7 (2016), 7714.3 (2017).
  - Credit ratings: Moody's Aa2 (2013–2016), Aa3 (2017); Standard and Poor's AA/AA- (2013–2017).

_Italic: Source — IMF staff report, Qatar (figures, tables, and notes extracted from the provided content)._

### Annex I. Status of Staff Recommendations

### Annex I. Status of Staff Recommendations

### Fiscal consolidation and public finances
- Further expenditure restraint took place in 2017, culminating in improved underlying fiscal position.
- The 2018 budget envisages further fiscal consolidation.
- Enhanced capacity and technical assistance could be required in moving to a medium-term budget framework and performance-based budgeting system.

### Revenue, subsidies, and tax policy
- Fuel prices are being adjusted in line with movements in international oil prices. The utility companies will continue to focus on cost recovery.
- The authorities plan to introduce a VAT and excises in the second half of 2018.

### Asset-liability management and liquidity
- The authorities have made significant progress, with asset-liability management framework guided by the risk-return trade-off between the cost of external borrowing versus the return on accumulated assets, and the financial sector's liquidity position.
- Emphasis has been placed on greater coordination and information sharing between the central government, QCB and QIA.
- Developing domestic financial markets, ensuring financial inclusion and fostering financial innovation are a cornerstone of the Second Strategic Plan for the Financial Sector.

### Structural reforms and business environment
- Authorities are advancing a structural reform agenda to improve the business environment. Consideration is being given to introducing special economic zones.
- Work is on-going on allowing majority foreign ownership of companies.
- Labor market reforms: Qatar recently announced a visa-entry program for 80 nationalities to stimulate tourism, created a new permanent-resident status for foreigners and has approved a new law to protect domestic staff.

### Financial integrity and statistics
- The authorities are increasingly focusing on enhancing AML/CFT effectiveness. They are putting in place a comprehensive mechanism to implement targeted financial sanctions and managing risks posed by non-profit organizations.
- Progress is being made in conducting a quarterly investment survey, compiling fiscal data according to the GFSM 2001, and subscribing to the SDSS.

*Source: Annex I. Status of Staff Recommendations (cr18135)*

### Annex II. External Stability Assessment

### Overview and methodology
- Qatar’s current account turned positive in 2017 due to a recovery in hydrocarbon prices.
- The Permanent Income Hypothesis (PIH) model and the current account model approach indicate that the external position is moderately weaker than the level implied by fundamentals and medium-term policy settings because the present level of saving of exhaustible hydrocarbon wealth is below the estimated level that would achieve intergenerational equity.
- Sustaining the baseline fiscal plans over the longer term would close the estimated current account gap.
- The preferred method for assessment in a major hydrocarbon exporting country is the external sustainability (ES) approach based on the PIH model.

### Exchange rate and trade
- Qatar’s real effective exchange rate has recently been depreciating broadly in line with the U.S. dollar. The Riyal depreciated by 7 percent in 2017. It has also depreciated by 9 percent so far this year.
- Heavy reliance on hydrocarbon exports, elastic supply of expatriate labor, and limited import substitution policies limit the impact of the exchange rate on the current account.

### Current account developments
- The current account balance increased to a surplus of 1.3 percent of GDP in 2017 (from a deficit of 5.5 percent in 2016).
- A major reason for improvement in 2017 was the decline in goods imports by 8 percent in 2017 compared to 2016.
- Export of services is projected to have fallen during the second half of 2017, reflecting lower tourist arrivals from the GCC countries.

### Capital and financial accounts
- The capital account deteriorated due to a drop in foreign financing.
- The capital and financial account have widened principally on account of commercial banks’ and other investment flows.
- Portfolio investment was in a sizable surplus.

### External sustainability (PIH/ES) findings
- For 2017, the gap with the current account required to provide a constant real income per capita is estimated at about 4.3 percentage points of GDP, and narrows to around 3.4 percentage points over the medium term.
- Results indicate that even though Qatar’s external position will remain a surplus in the medium term, it would be weaker than the level needed to preserve intergenerational equity, indicating the importance of sustained fiscal consolidation.

### Foreign reserve developments and buffers
- Reserves at the QCB have declined from US$31 billion in 2016 to US$15 billion in 2017.
- In 2017, foreign reserves as a percentage of broad money were 9 percent and were three months of imports of goods and services.
- QCB reserves only cover 23 percent of the Fund’s reserve metric, but the large stock of assets at the Qatar Investment Authority (QIA) provides an additional buffer with a large stock of assets estimated to be about US$300 billion in 2017.
- In early 2018, QCB reserves have increased to US$18 billion at end-February.

### Foreign Reserve Adequacy Assessment (selected figures)
- External short-term debt: 14 9 10 10 12 17 15 (2011–2017 row shown in source table)
- Other liabilities (portfolio liabs + other invt liabs - short-term debt): 109 108 106 111 149 166 (2011–2017 row shown in source table)
- Broad money: 85 105 125 138 143 137 166 (2011–2017 row shown in source table)
- Exports of goods and services: 122 143 145 140 92 72 87 (2011–2017 row shown in source table)
- Actual foreign reserves: 16 33 42 43 37 31 15 (2011–2017 row shown in source table)
- QIA assets (estimates): 117 154 206 241 253 355 337 (2011–2017 row shown in source table)
- ARA metric: 254 95 25 52 49 56 63 (2011–2017 row shown in source table) [values presented as in source table]
- Foreign reserves as a % of the ARA metric (2011–2017): 66 68 18 27 55 62 3
- Foreign reserves in percent of GDP (2011–2017): 9.8 17.5 21.0 20.7 22.4 20.6 8.7
- Foreign reserves in percent of broad money (2011–2017): 19.2 31.3 33.3 33.0 25.7 23.0 8.8
- Foreign reserves in months of imports of goods and services (2011–2017): 3.6 6.7 7.8 8.6 7.0 5.7 2.5
- Foreign reserves and QIA assets as a % of the ARA metric (2011–2017): 53 63 78 48 154 45 87 69 35 58 [table formatting in source; values shown as presented]
- Foreign reserves and QIA assets in percent of GDP (2011–2017): 79 100 125 138 176 253 211
- Foreign reserves and QIA assets in percent of broad money (2011–2017): 156 179 198 205 202 282 212
- Foreign reserves and QIA assets in months of imports of goods and services (2011–2017): 29 38 46 57 57 70 60

(Note: the source presents these series in tabular form for 2011–2017.)

### Macro-balance (EBA) approaches and results
- EBA-Lite results for 2017:
  - CA-Actual: 1.3%
  - CA-Fitted: 12.4%
  - CA-Norm: 13.0%
  - Residual: -11.1%
  - CA-Gap: -11.7%
  - Policy gap: -0.6%
- EBA-Oil results for 2017:
  - CA-Actual: 1.3%
  - CA-Fitted: -6.9%
  - CA-Norm: 2.2%
  - Residual: 8.2%
  - CA-Gap: -0.9%
  - Policy gap: -9.1%
- The EBA-Lite gives a current account norm of a surplus of 13 percent of GDP and a current account gap of 11.7 percent of GDP but with very large residuals, making it potentially misleading for Qatar.
- The EBA-Oil model provides a better fit; in 2017 it suggests a current account norm of a surplus of 2.2 percent of GDP compared to the actual surplus of 1.3 percent, suggesting a current account gap of about 1 percent of GDP.
- Results should be interpreted with caution given large residuals.

*Source: Annex II. External Stability Assessment (cr18135)*

### Annex III. Risk Assessment Matrix

### Principal risks, impacts, and policy responses
- Lower energy prices, driven by weakening OPEC/Russia cohesion and/or recovery of oil production in the African continent (Likelihood: Low)
  - Expected impact: Medium to High
  - Effects: Lower oil prices would weaken fiscal and external positions; government financing requirements would increase; potential lower credit growth to the private sector; adverse impact for non-oil growth; banking system liquidity and asset quality could be affected.
  - Policy response:
    - The availability of fiscal space allows for gradual fiscal adjustment and to absorb temporary oil price changes. Though, additional fiscal measures would be appropriate in response to permanently lower oil prices.
    - A successful diversification program would help mitigate the impact of oil price volatility.
    - Ensure adequate banking system liquidity and enhance central bank liquidity management. The banking sector is in a position to withstand adverse shocks.

- Intensification of the risks of fragmentation/security dislocation in parts of the Middle East, Africa Asia, and Europe, leading to socio-economic disruptions (Likelihood: High)
  - Expected impact: Medium
  - Effects: Could cause a spike in hydrocarbon prices improving fiscal and external balances but could be offset by weaker investor confidence and possible supply, trade and capital flow disruptions.
  - Policy response: Maintain prudent fiscal and liquidity policies.

- Potential reversal of fiscal reforms or limited fiscal adjustment going forward (Likelihood: Low)
  - Expected impact: Medium
  - Effects: Lower pace of underlying fiscal adjustment; larger financing needs and increased dependency on external and domestic financing.
  - Policy response: Correct potential slippages and implement gradual fiscal consolidation underpinned by medium term fiscal framework.

- Deepening in the Diplomatic Rift in the Gulf region and slowdown in GCC integration (Likelihood: medium as characterized in source)
  - Expected impact: Medium
  - Effects: Investor confidence across the GCC could be affected, with impact for capital flows and financing costs; broader erosion of confidence, reduced investment and growth could emerge.
  - Policy response: Prudent macroeconomic policies combined with enhanced surveillance of financial system would be important.

- Structurally weak growth in key advanced economies (Likelihood: High)
  - Expected impact: Low
  - Effects: Would lower Qatar’s fiscal and external surpluses; spillovers to the non-oil sector similar to oil price drop scenario.
  - Policy response: Policymakers should further intensify diversification efforts to partially offset these potential negative spillovers.

- Tighter global financial conditions associated with continued Fed monetary policy normalization (Likelihood: High)
  - Expected impact: Medium
  - Effects: The government will have to access international markets at higher yields; individual banks reliant on wholesale funding could face liquidity pressures and banks’ profit margin could shrink.
  - Policy response: In addition to strong macroeconomic fundamentals, large financial cushions and a policy framework are in place to mitigate the impact.

*Source: Annex III. Risk Assessment Matrix (cr18135)*

### Annex IV. Public Sector and External Debt Sustainability Analyses

### Annex IV. Public Sector and External Debt Sustainability Analyses

### Qatar Central Government DSA – Baseline Scenario (Major findings and projections)
- Time horizon and data: As of December 31, 2017; public sector defined as central government.  
- Gross nominal public debt (in percent of GDP):  
  - 2015: 24.0  
  - 2016: 34.9  
  - 2017: 46.5  
  - 2018: 54.0  
  - 2019: 55.4  
  - 2020: 52.0  
  - 2021: 48.2  
  - 2022: 44.9  
  - 2022 (alternate column): 41.8
- Public gross financing needs (in percent of GDP):  
  - 2015: -7.9  
  - 2016: 6.8  
  - 2017: 11.5  
  - 2018: 8.0  
  - 2019: 9.1  
  - 2020: 1.3  
  - 2021: 3.7  
  - 2022: 3.8  
  - 2022 (alternate column): 0.5
- Real GDP growth (in percent): 2015: 13.2; 2016: 3.6; 2017: 2.2; 2018: 2.1; 2019: 2.6; 2020: 2.7; 2021: 2.6; 2022: 2.7; 2022 (alt): 2.9
- Inflation (GDP deflator, in percent): 2015: 5.9; 2016: -22.9; 2017: -9.4; 2018: 6.8; 2019: 7.7; 2020: 2.7; 2021: -0.1; 2022: 0.7; 2022 (alt): 2.2
- Nominal GDP growth (in percent): 2015: 20.1; 2016: -20.2; 2017: -7.4; 2018: 9.1; 2019: 10.5; 2020: 5.5; 2021: 2.5; 2022: 3.5; 2022 (alt): 5.1
- Effective interest rate (in percent; defined as interest payments divided by previous year debt stock): 2015: 5.9; 2016: 4.7; 2017: 3.9; 2018: 3.6; 2019: 4.7; 2020: 4.9; 2021: 5.1; 2022: 5.4; 2022 (alt): 5.7
- Sovereign spreads and ratings: EMBIG (bp): 251; 5Y CDS (bp): 101. Ratings: Moody's Aa3/Aa3; S&P s AA- / A A-? (table shows "AA-AA-"); Fitch AA- / AA-.
- Change in gross public sector debt (in percent of GDP, cumulative 2015–2022):  
  - 2015: 0.6  
  - 2016: 10.0  
  - 2017: 11.6  
  - 2018: 7.5  
  - 2019: 1.4  
  - 2020: -3.4  
  - 2021: -3.8  
  - 2022: -3.3  
  - 2022 (alt): -3.1  
  - cumulative (to end): -4.7
- Identified debt-creating flows (cumulative): -13.3; 5.0; 12.1; 2.4; -3.0; -5.4; -3.1; -2.2; -2.6; -13.9
- Primary deficit (in percent of GDP): 2015: -11.0; 2016: -2.7; 2017: 7.8; 2018: 4.7; 2019: -0.2; 2020: -5.1; 2021: -4.4; 2022: -3.1; 2022 (alt): -2.8; cumulative: -10.9
- Primary (noninterest) revenue and grants (in percent of GDP): cumulative 173.6; year values include 39.3; 42.8; 30.7; 26.3; 28.9; 31.5; 30.3; 28.8; 27.6
- Primary (noninterest) expenditure (in percent of GDP): cumulative 162.7; year values include 28.3; 40.1; 38.5; 31.0; 28.8; 26.5; 25.9; 25.7; 24.8
- Automatic debt dynamics (in percent of GDP): -2.3; 7.8; 4.3; -2.3; -2.8; -0.3; 1.3; 0.9; 0.2; cumulative -3.0
  - Real interest rate contribution: -0.1; 8.9; 5.1; -1.4; -1.6; 1.1; 2.6; 2.1; 1.5; cumulative 4.3
  - Real GDP growth contribution: -2.2; -1.1; -0.8; -0.9; -1.3; -1.4; -1.3; -1.3; -1.2; cumulative -7.4
- Exchange rate depreciation contribution: 0.0 across presented years.
- Residual, including asset changes (in percent of GDP): 13.9; 5.0; -0.5; 5.1; 4.4; 2.0; -0.7; -1.1; -0.5; cumulative 9.2
- Debt-stabilizing primary balance assumption: Assumes key variables remain at level of last projection year; debt-stabilizing primary balance shown as 0.2 (balance) in figure notes.

### Composition of Government Debt and Alternative Scenarios
- Key underlying assumptions (in percent): Baseline 2017–2022 values:  
  - Real GDP growth: 2.1; 2.6; 2.7; 2.6; 2.7; 2.9  
  - Inflation: 6.8; 7.7; 2.7; -0.1; 0.7; 2.2  
  - Primary Balance: -4.7; 0.2; 5.1; 4.4; 3.1; 2.8  
  - Effective interest rate: 3.6; 4.7; 4.9; 5.1; 5.4; 5.7
- Historical scenario (alternative):  
  - Real GDP growth: 2.1; 9.8; 9.8; 9.8; 9.8; 9.8  
  - Primary Balance: -4.7; 8.5; 8.5; 8.5; 8.5; 8.5  
  - Effective interest rate: 3.6; 3.9; 4.4; 4.0; 4.1; 4.3
- Constant Primary Balance scenario: Primary Balance held at -4.7 for 2017–2022; other variables as baseline.
- Composition charts (descriptive): show projections for public gross financing needs, gross nominal public debt by currency (local vs foreign) and by maturity (short-term vs medium and long-term), and composition of public debt across 2015–2022 under baseline and alternative scenarios.

### Qatar: External Debt Sustainability Framework (Key indicators and projections, 2012–23)
- External debt (in percent of GDP):  
  - 2012: 56.5  
  - 2013: 49.3  
  - 2014: 48.6  
  - 2015: 73.8  
  - 2016: 110.9  
  - 2017: 87.9  
  - 2018: 85.6  
  - 2019: 81.6  
  - 2020: 78.3  
  - 2021: 74.9  
  - 2022: 71.2  
  - 2023: 67.4
- Debt-stabilizing non-interest current account (long-run constant balance that stabilizes debt ratio): 5.5 (percent of GDP).
- Change in external debt (in percent of GDP):  
  - 2012: -17.4  
  - 2013: -7.2  
  - 2014: -0.7  
  - 2015: 25.2  
  - 2016: 37.0  
  - 2017: -22.9  
  - 2018: -2.3  
  - 2019: -4.1  
  - 2020: -3.3  
  - 2021: -3.4  
  - 2022: -3.7  
  - 2023: -3.8
- Identified external debt-creating flows (sum of current account deficit excluding interest, net non-debt capital inflows, and automatic debt dynamics): see line 3 values by year — notably large negative contributions in 2012–2014 and positive 25.2 in 2015; 2016: -4.6; 2017: -7.1; projections show continued negative flows.
- Current account deficit, excluding interest payments (in percent of GDP): 2012: -31.8; 2013: -31.5; 2014: -25.0; 2015: -10.5; 2016: 2.9; 2017: -4.4; 2018: -7.1; 2019: -7.3; 2020: -7.2; 2021: -6.5; 2022: -6.2; 2023: -5.5
- Deficit in balance of goods and services (in percent of GDP): 2012: -46.5; 2013: -43.1; 2014: -37.0; 2015: -20.1; 2016: -5.9; 2017: -13.6; 2018: -15.6; 2019: -14.7; 2020: -12.9; 2021: -10.9; 2022: -10.7; 2023: -10.7
- Exports and imports (in percent of GDP): Exports 2012: 72.6; 2013: 72.7; 2014: 68.0; 2015: 56.1; 2016: 47.5; 2017: 53.2; Imports 2012: 26.1; 2013: 29.7; 2014: 31.0; 2015: 36.0; 2016: 41.6; 2017: 39.6
- Net non-debt creating capital inflows (negative values) approx -0.5 to -0.6 (2012–2023 range).
- Automatic debt dynamics (in percent of GDP): large negative contributions in earlier years and a 22.9 in 2016 reflecting price and exchange rate changes; subsequent years small positive contributions (e.g., 0.4 in 2017; 0.6 in 2018; 1.0 in 2019).
  - Contribution from nominal interest rate (percent): 2012: 0.8; 2013: 1.1; 2014: 1.0; 2015: 1.7; 2016: 3.0; 2017: 2.6; 2018: 2.7; 2019: 2.8; 2020: 3.2; 2021: 3.1; 2022: 3.0; 2023: 1.1
  - Contribution from real GDP growth (percent): 2012: -2.8; 2013: -2.2; 2014: -1.9; 2015: -1.7; 2016: -2.1; 2017: -2.3; 2018: -2.1; 2019: -1.8; 2020: -1.9; 2021: -2.0; 2022: -2.1; 2023: -1.9
  - Contribution from price and exchange rate changes: 2012: -11.4; 2013: -3.4; 2014: -0.9; 2015: 0.1; 2016: 21.9; 2017: ... (not fully tabulated)
- Residual, including change in gross foreign assets (in percent of GDP): 2012: 28.3; 2013: 29.2; 2014: 26.7; 2015: 36.3; 2016: 11.9; 2017: -18.3; 2018: 4.8; 2019: 2.7; 2020: 3.1; 2021: 2.5; 2022: 2.3; 2023: 3.1
- External debt-to-exports ratio (in percent): 2012: 77.8; 2013: 67.8; 2014: 71.5; 2015: 131.7; 2016: 233.4; 2017: 165.3; 2018: 161.0; 2019: 161.7; 2020: 165.9; 2021: 167.8; 2022: 168.0; 2023: 166.5
- Gross external financing need (in billions of US dollars): 2012: -14.8; 2013: 15.7; 2014: 13.7; 2015: 53.2; 2016: 98.4; 2017: 125.1; 2018: 96.2; 2019: 99.7; 2020: 102.6; 2021: 105.7; 2022: 107.9; 2023: 106.9
  - In percent of GDP: 2012: -8.8; 2013: 7.9; 2014: 6.6; 2015: 32.3; 2016: 64.5; 2017: 88.6; 2018: 62.1; 2019: 57.9; 2020: 56.2; 2021: 56.6; 2022: 55.7; 2023: 53.3

### Key Macroeconomic Assumptions Underlying Baseline (selected)
- Nominal GDP (US dollars): 2012–2023 sequence includes 167.8; 198.7; 206.2; 164.6; 152.5; 141.2; 154.9; 172.2; 182.5; 186.7; 193.6; 200.4
- Real GDP growth (in percent): 2012: 4.7; 2013: 4.4; 2014: 4.0; 2015: 3.6; 2016: 2.2; 2017: 9.8; 2018: 6.7; 2019: 2.2; 2020: 2.7; 2021: 2.2; 2022: 2.4; 2023: 2.7; 10-year average 3.0; standard deviation 2.8
- GDP deflator in US dollars (change in percent): 2012: 18.3; 2013: 6.4; 2014: 1.9; 2015: -0.2; 2016: -22.9; 2017: 1.2; 2018: 15.9; 2019: -9.4; 2020: 6.8; 2021: 8.8; 2022: 3.4; 2023: -0.3; 10-year avg 0.7; std dev 0.7
- Nominal external interest rate (in percent): 2012: 1.4; 2013: 2.2; 2014: 2.2; 2015: 3.6; 2016: 3.2; 2017: 3.0; 2018: 2.0; 2019: 3.2; 2020: 2.6; 2021: 3.5; 2022: 3.4; 2023: 4.0; 10-year avg 4.1; std dev 4.1
- Growth of exports (US dollar terms, in percent): 2012: 17.3; 2013: 1.1; 2014: -3.0; 2015: -34.2; 2016: -21.5; 2017: 11.5; 2018: 34.4; 2019: 22.3; 2020: 11.7; 2021: 0.3; 2022: -4.5; 2023: -2.3; 10-year avg -0.3; std dev 0.8
- Growth of imports (US dollar terms, in percent): 2012: 24.9; 2013: 7.8; 2014: 8.6; 2015: -7.4; 2016: 7.1; 2017: 12.5; 2018: 17.8; 2019: 3.8; 2020: 6.0; 2021: 0.7; 2022: -2.1; 2023: 1.5; 10-year avg -1.1; std dev -0.8
- Current account balance, excluding interest payments (in percent of GDP): series includes 31.8; 31.5; 25.0; 10.5; -2.9; 19.9; 12.0; 4.4; 7.1; 7.3; 7.2; 6.5; 6.2; 5.5

### External Debt Bound Tests and Stress Scenarios (high-level outcomes)
- Bound tests apply permanent one-half standard deviation shocks to interest rate, growth, and current account; additional scenarios include combined shocks, 30 percent real depreciation (one-time in 2010 historically), growth shock, and non-interest current account shock.
- Representative baseline and scenario markers in figure captions: Baseline external debt values around 75 (percent of GDP); scenario boxes show various averages and historical ten-year averages for comparison.
- Gross financing need under baseline is presented on right scale in the figure (graphical).

### Policy implications and fiscal-financial context (narrative findings from staff and authorities)
- Macroeconomic context and buffers:
  - Qatar experienced slower activity in 2017 led by non-hydrocarbon sector growth; authorities lifted moratorium on North Oil Field projects and plan to increase LNG capacity by 30 percent.
  - Current account moved to surplus in 2017 versus large deficit in previous year; international reserves increasing.
  - Authorities hold significant fiscal and external buffers: accumulated savings equaled 334 percent of government debt in 2017 and were more than 112 times the projected fiscal deficit for 2018.
- Fiscal policy stance and reforms:
  - General government deficit narrowed to 6 percent of GDP in 2017 from 9.3 percent in previous year, projected to narrow to 1.4 percent of GDP in 2018.
  - Authorities pursue gradual, growth-friendly fiscal consolidation via expenditure rationalization and domestic resource mobilization, while preserving pro-growth spending (infrastructure, health, education).
  - Planned measures include VAT and excise tax on tobacco and carbonated drinks by end-2018; ongoing utility tariff reforms and regular adjustment of domestic fuel prices; aim for full market price commercialization over ten years for utilities.
  - Institutional reforms: move to medium-term budgetary framework, performance-based budgeting, establishment of Macro-Fiscal Unit, public investment unit, and progress on GFMIS for GFSM 2001 consistency.
- Financial sector resilience and supervision:
  - Banking sector sound: NPLs at 1.6 percent; capital adequacy ratio at 16.6 percent; provisions to NPL ratios comfortable.
  - Liquidity injections by QCB and deposits by Qatar Investment Authority helped stabilize the system amid the diplomatic rift; non-resident deposit outflows have abated.
  - QCB early adopter of Basel III; stress tests indicate resilience even under severe shocks. Macroprudential tightening includes loan-to-deposit ratio requirement of 100 percent (January 2018).
  - Authorities monitor real estate market closely and are developing measures (housing vacancy metrics).
- Structural reforms and private sector development:
  - Authorities advancing diversification and private sector engagement via NDS 2011–16 and NDS 2018–22; emphasis on construction, services, financial services, real estate, and tourism.
  - Measures to encourage FDI and private sector participation: majority foreign ownership initiatives, draft law for permanent residency for outstanding contributors, worker dispute resolution mechanisms, consideration of minimum wage under ILO framework, special economic zones, and privatization in health and education.
- Data and statistical issues relevant for surveillance:
  - Data broadly adequate for surveillance but improvements needed in frequency, timeliness, and coverage for real GDP, real estate, financial accounts of BOP, IIP, and external debt statistics.
  - QCB reports quarterly BOP following BPM5 to STA; quarterly IIP not yet reported; new quarterly nonfinancial sector survey launched August 2017 to improve IIP and primary income coverage.
  - Government implementing GFMIS; GFSM 2001 figures currently estimated by staff from modified cash data, progress ongoing.
  - Qatar is a GDDS participant since December 2005; November 2016 mission found eleven data categories meet SDDS requirements for coverage, periodicity, and timeliness.

_Italic: Source — IMF staff, Annex IV. Public Sector and External Debt Sustainability Analyses (as provided)._

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18135.pdf_