## 2. AI in Qatar: Opportunities and Potential Economic Impact ## Source details **Canonical URL:** [2. AI in Qatar: Opportunities and Potential Economic Impact](https://www.imf.org/-/media/files/publications/cr/2025/english/1qatea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1qatea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1qatea2025001-print-pdf.pdf.json) --- ### Context and Strategic Goals - NDS3 launched in January 2024 to transition from a costly state-driven growth model to a private sector-led, knowledge-based economy. - NDS3 is reform-focused, sets ambitious targets, and identifies “diversification clusters” (Annex I). - Non-hydrocarbon economy accounts for about two-thirds of total output; diversification in fiscal revenue and exports has progressed more slowly. - Total factor productivity has exhibited a declining trend, constraining growth. - Reform momentum strengthened significantly since NDS3 launch. ### Recent Economic Developments and Macro Indicators - Growth and output: - Real GDP growth: 4.2 percent in 2022; 1.2 percent in 2023. - Non-hydrocarbon growth: 5.7 percent in 2022; 1.1 percent in 2023. - Real GDP growth averaged 1.4 percent (year on year) in the first three quarters of 2024, supported by non-hydrocarbon growth of 2.9 percent. - Non-hydrocarbon output gap estimated to be close to zero. - Tourism and labor: - Visitor arrivals rose 60 percent from 2022 to 2023. - Peak tourist arrivals during the 2024 soccer Asian Cup (January–February) exceeded those during the World Cup. - Population continued to rise and employment reached a record high. - Inflation and wages: - Headline inflation: 5 percent in 2022; 3.0 percent in 2023 (period average); 1.2 percent in 2024 through October. - Housing and recreation services inflation weakened; producer price and wage inflation remained contained. - Monetary and financial conditions: - QCB followed the US Federal Reserve in setting policy rates and improved liquidity management via calibrated T-bill issuance. - Bank lending to domestic private sector eased to 5 percent (year-on-year) in 2023. - Domestic credit accelerated in 2024 as private credit to services and trade strengthened; positive public credit growth resumed. - Credit to real estate contracted earlier in 2024 but grew from August 2024. - External sector and reserves: - Current account surplus: 27 percent of GDP in 2022; 17 percent of GDP in 2023. - QCB international reserves rose to US$53.8 billion in November 2024; projected reserve coverage to reach 62 percent of the ARA metric by end 2024. - Qatar Investment Authority foreign assets estimated to have exceeded 200 percent of GDP in 2023. - External position assessed to be moderately stronger than levels suggested by medium-term fundamentals and desirable policies (Annex II). - Fiscal developments: - Overall fiscal surplus narrowed to 5.6 percent of GDP in 2023 and declined further in the first three quarters of 2024 as hydrocarbon revenues weakened. - 2023 central government spending rose by 3 percentage points of GDP from 2022 (1½ ppts of GDP above budgeted). - 2023 non-hydrocarbon primary balance (NHPB) worsened by 1½ ppts of non-hydrocarbon GDP from 2022. - Central government debt largely unchanged at 43 percent of GDP at end-2023. - Banking sector health: - Capital Adequacy Ratio close to 20 percent in 2024Q3. - Sector-wide NPL ratio broadly unchanged at 3.9 percent in 2024Q3; NPLs provisioned by more than 80 percent. - Net interest margin (NIM) remained robust. - Non-resident deposits declined significantly in 2022 before stabilizing since 2023; foreign liabilities remained elevated but with lengthened maturity and more diversified funding. ### Outlook and Projections - Growth projections: - Real GDP growth projected to improve to 2 percent in 2024–25 (staff nowcasting estimates). - Medium-term growth expected to accelerate to an average of around 4¾ percent, driven by North Field LNG production expansion (a cumulative increase of around 85 percent by 2030) and initial NDS3 reform gains. - Inflation: - Headline inflation projected to ease to 1 percent in 2024, before converging to 2 percent over the medium term. - External and fiscal outlook: - External and fiscal surpluses expected to remain but decline as a share of GDP as hydrocarbon prices soften. - Central government debt projected to gradually decline to around 36 percent of GDP by 2029. - Qatar assessed to have a low overall risk of sovereign stress (Annex IV). ### Risks to the Outlook - Downside risks: - External: sharper-than-expected global growth slowdown; increased volatility in global financial conditions and commodity prices; worsening geopolitical tensions. - Regional conflict: could affect tourism, capital inflows, and hydrocarbon price volatility. - Domestic: further weaknesses in the real estate sector despite 2023 mitigating measures. - Medium/long term: significant expansion of global natural gas supply exerting downward price pressure; worsening climate stressors; disorderly global energy transition. - Upside factors: - Sustained high hydrocarbon prices and accelerated NDS3 reforms could strengthen the outlook. - Balance of risks: - Risks broadly balanced; implementation quality of NDS3 is critical—ambitious initiatives could yield misallocation and negatively affect public finances and growth if poorly implemented. ### Policy Priorities and Recommendations - Overarching policy focus: - Maintain stability against global headwinds while accelerating reforms. - Policy discussions emphasized: (i) sustaining fiscal discipline and accelerating revenue, expenditure and fiscal institutional reforms; (ii) safeguarding financial sector stability and deepening financial markets; (iii) enhancing the monetary policy operational framework; and (iv) intensifying structural reforms guided by NDS3. - Fiscal policy: enhance resilience and support diversification: - Authorities plan to resume gradual fiscal consolidation from 2024. - NHPB estimated to remain consistent with the Permanent Income Hypothesis (PIH) benchmark. - 2024 budget envisages spending cuts worth 2 ppts of GDP from the 2023 outturn, mostly in capital expenditure; fiscal outturn up to Q3 2024 suggests cuts could be milder, closer to 1½ ppts of GDP. - Fiscal stance likely to tighten, with the NHPB projected to improve by around ¾ ppt of non-hydrocarbon GDP. - 2025 budget envisages broadly prudent spending plans; medium-term budget updated to reflect NDS3 spending needs with continued gradual consolidation. - Fiscal institutional reforms and anchors: - Staff recommended adopting a fiscal anchor based on the PIH benchmark to ensure intergenerational equity. - Key PIH long-term parameters used in staff calculations: - Inflation and non-hydrocarbon real output growth = 2 percent - Population growth = 0.75 percent - Natural gas production volume = constant after NF expansion in 2030 - Nominal hydrocarbon price growth = 2 percent - Nominal returns on QIA assets and discount rate = both 4.75 percent - Staff recommendations: save higher-than-expected hydrocarbon revenues; deploy targeted support in downturns while credibly guiding the NHPB back to the PIH-based anchor; account for GRE expenditures in fiscal stance assessment; update PIH periodically as global energy transition unfolds. - Revenue diversification and tax reform: - Introduce the value-added tax (VAT): - Infrastructure for VAT introduction is readied. - Staff reiterated accelerating introduction of a broad-based VAT with a starting rate in line with the GCC treaty. - Estimated revenue gain: up to 1½ percent of GDP with a VAT rate of 5 percent. - Allow businesses sufficient time to prepare (e.g., 12 months). - Broaden the corporate income tax (CIT): - Foreign companies already subject to 10 percent of CIT in Qatar. - Qatar aiming to start implementation of the global minimum CIT on multinationals from the beginning of 2025. - Consider introducing a CIT for domestic firms over the medium term (with appropriate thresholds). - Energy pricing, subsidies, and climate objectives: - Gradually align domestic energy prices with corresponding export prices to increase revenue, generate savings, and support climate goals. - First step: improve transparency of domestic gas pricing. - Expand liquefaction and export facilities alongside North Field LNG expansion to export extra domestic gas supply. - Lift caps on diesel and gasoline prices and gradually phase out remaining electricity subsidies. - Spending efficiency, composition, and public investment: - Contain the wage bill and promote government efficiency, digitalization, link headcount increases to service needs, incentivize Qataris to seek private sector jobs, tighten eligibility for benefits, and reduce staffing by natural attrition. - Reorient public spending toward higher returns: prioritize investment in building a knowledge-based economy, AI adoption, and climate resilience. - Strengthen public investment management; IMF PIMA and Climate-PIMA recommended. - Financial sector, monetary policy, and markets: - Continue to safeguard banking sector stability; make granular data available to enhance monitoring (e.g., average maturity structure of foreign assets/liabilities, NPLs by sector). - Support QDB initiatives for viable but liquidity-constrained SMEs. - Deepen domestic capital markets to diversify banks’ funding; consider primary dealers and a derivatives exchange. - Strengthen financial safety net: deposit insurance, recovery and resolution frameworks, and continue macroprudential review; IMF TA supported. - Monetary policy: maintain exchange rate peg and align policy rates with the U.S. Federal Reserve; improve liquidity forecasting and country risk premium assessment; finalize RTGS upgrade; over time widen policy rate corridor and develop active interbank market. ### Structural reforms and implementation priorities - Reform priorities: - Build a highly skilled labor force; promote innovation and knowledge spillovers; leverage AI readiness; strengthen climate sustainability. - Labor market and human capital: - NDS3 target: have 20 percent of Qataris employed in the private sector. - Attract and retain high-skilled expatriates; implement visa schemes (e.g., five-year Mustaqel), intensify Kafala reform, and strengthen social safety net including pension scheme. - Increase female labor force participation and leverage female talent. - Boosting economic complexity: - Increase R&D funding from 0.7 percent of GDP to 1.5 percent (NDS3 target), with 60 percent from private sector. - Foster innovation, reduce non-tariff barriers, liberalize services trade, and enhance FDI entry conditions and PPPs. - Digitalization, AI, and climate agenda: - Digital Agenda 2030 launched March 2024; Qatar close to advanced economies in AI readiness. - Early-2024: Qatar raised $2.5 billion in a debut green deal under its sovereign green financing framework. - Share of energy capacity from renewables reached about 9 percent in 2023 against a target of 20 percent by 2030. - Priorities: enhance digital skills, promote AI penetration in production, strengthen cybersecurity, facilitate job transitions, increase green investment, and phase out remaining energy subsidies gradually. ### Implementation, sequencing, and coordination - Successful reform implementation hinges on proper prioritization, inter-agency coordination, effective execution, and careful management of policy spillovers. - Incentives to specialized economic zones and diversification clusters should target well-identified externalities and be time-bound; periodic cost-benefit assessments recommended. ### Authorities’ views - Authorities broadly concurred with staff’s economic assessment and risks. - They highlighted significant growth boost from North Field LNG expansion and intensifying reform efforts under NDS3. - Authorities noted regional conflict had no visible impact on Qatar, including on LNG shipment. - Authorities emphasized strong fundamentals and policy buffers, and expressed interest in exploring a PIH-based fiscal anchor, assessing timing for VAT, and implementing CIT Pillar II in line with the global timetable. ### Box 2 — AI in Qatar: Key findings and policy implications - Policy framework, investments, and readiness: - National AI Strategy released in 2019; AI Committee established in 2021. - A $2.5 billion AI investment package announced in May 2024. - Overall, Qatar is close to AEs in AI readiness. - Labor market exposure and complementarities: - About 37 percent of the labor force in Qatar is exposed to AI (an 18 ppts increase over a decade). - Qatar’s AI exposure is comparable to the EM average but lower than the AE average of 58 percent. - Staff analysis suggests about 75 percent of the high AI exposure jobs in Qatar have high “complementarity.” - Qatar’s labor market opportunity-to-risk ratio from AI exposure is significantly higher than EM or AE averages. - Private sector labor shifts and workforce composition: - Private sector employment has grown by around 27 percent over the last decade. - Technicians and professionals increased by over 90 percent. - Sectoral exposure and NDS3 clusters: - “Enabling clusters” (IT & digital, financial services, education) concentrate in high AI exposure and complementarity. - “Growth clusters” (manufacturing, logistics, tourism) tend to have more limited AI exposure. - Scenario analysis and potential productivity impact: - Under an optimistic scenario—successful reforms and faster AI adoption—labor productivity growth could be lifted by an average of 1 ppt annually (above the baseline) over the medium term. - Policy implications: - Strengthen human capital, foster innovation, support private sector growth, and target enabling clusters to harness AI-driven productivity gains while managing sectoral differences in AI exposure. *Source: IMF staff report — Chapter 2. AI in Qatar: Opportunities and Potential Economic Impact (from 1qatea2025001-print-pdf).* ### 2. AI in Qatar: Opportunities and Potential Economic Impact ____________________________________ 26 ### 2. AI in Qatar: Opportunities and Potential Economic Impact ### Context and Strategic Goals - Qatar has started implementation of the Third National Development Strategy (NDS3), launched in January 2024, to transition from a costly state-driven growth model to a private sector-led, knowledge-based economy. - NDS3 is reform-focused, setting ambitious targets and identifying “diversification clusters” to build comparative advantages (Annex I). - Despite significant public infrastructure investment, non-hydrocarbon economy accounts for about two-thirds of total output, while diversification in fiscal revenue and exports has progressed more slowly. - Total factor productivity has exhibited a declining trend, constraining growth. - Reform momentum strengthened significantly since NDS3 launch. ### Recent Economic Developments and Macro Indicators - Growth and output - Real GDP growth: 4.2 percent in 2022; 1.2 percent in 2023. - Non-hydrocarbon growth: 5.7 percent in 2022 (World Cup-related boost); 1.1 percent in 2023 (construction contracted, services moderated). - Real GDP growth averaged 1.4 percent (year on year) in the first three quarters of 2024, supported by non-hydrocarbon growth of 2.9 percent. - Non-hydrocarbon output gap estimated to be close to zero. - Tourism and labor - Visitor arrivals rose 60 percent from 2022 to 2023. - Peak tourist arrivals during the 2024 soccer Asian Cup (January–February) exceeded those during the World Cup. - Population continued to rise and employment reached a record high. - Inflation and wages - Headline inflation: 5 percent in 2022; 3.0 percent in 2023 (period average); 1.2 percent in 2024 through October. - Housing and recreation services inflation weakened; producer price and wage inflation remained contained. - Monetary and financial conditions - QCB followed the US Federal Reserve in setting policy rates and improved liquidity management via calibrated T-bill issuance. - Bank lending to domestic private sector eased to 5 percent (year-on-year) in 2023. - Domestic credit accelerated in 2024 as private credit to services and trade strengthened; positive public credit growth resumed to support investment projects. - Credit to real estate contracted (year-on-year) earlier in 2024 but grew from August 2024. - External sector and reserves - Current account surplus: 27 percent of GDP in 2022; 17 percent of GDP in 2023. - QCB international reserves rose gradually to US$53.8 billion in November 2024; projected reserve coverage to reach 62 percent of the ARA metric by end 2024. - Qatar Investment Authority foreign assets estimated to have exceeded 200 percent of GDP in 2023. - External position assessed to be moderately stronger than levels suggested by medium-term fundamentals and desirable policies (Annex II). - Fiscal developments - Overall fiscal surplus narrowed to 5.6 percent of GDP in 2023 and declined further in the first three quarters of 2024 as hydrocarbon revenues weakened. - 2023 central government spending rose by 3 percentage points of GDP from 2022 (1½ ppts of GDP above budgeted). - The 2023 non-hydrocarbon primary balance (NHPB) worsened by 1½ ppts of non-hydrocarbon GDP from 2022. - Central government debt remained largely unchanged at 43 percent of GDP at end-2023. - Banking sector health - Capital Adequacy Ratio close to 20 percent in 2024Q3. - Sector-wide NPL ratio broadly unchanged at 3.9 percent in 2024Q3; bank-level NPLs varied considerably and tilted to the weaker side. - NPLs provisioned by more than 80 percent. - Net interest margin (NIM) remained robust. - Non-resident deposits declined significantly in 2022 before stabilizing since 2023; foreign liabilities remained elevated but with lengthened maturity and more diversified funding. ### Outlook and Projections - Growth projections - Real GDP growth projected to improve to 2 percent in 2024–25 (staff nowcasting estimates; Text Figure 7 and Annex III). - Medium-term growth expected to accelerate to an average of around 4¾ percent, driven by North Field LNG production expansion (a cumulative increase of around 85 percent by 2030) and initial NDS3 reform gains. - Inflation - Headline inflation projected to ease to 1 percent in 2024, before converging to 2 percent over the medium term as monetary policy eases and growth strengthens. - External and fiscal outlook - External and fiscal surpluses expected to remain but decline as a share of GDP as hydrocarbon prices soften. - Central government debt projected to gradually decline to around 36 percent of GDP by 2029. - Qatar assessed to have a low overall risk of sovereign stress (Annex IV). ### Risks to the Outlook - Downside risks - External: sharper-than-expected global growth slowdown; increased volatility in global financial conditions and commodity prices; worsening geopolitical tensions. - Regional conflict: limited impact so far but could affect tourism, capital inflows, and hydrocarbon price volatility. - Domestic: further weaknesses in the real estate sector; although mitigants include 2023 measures enhancing transparency and regulation of real estate activities. - Medium/long term: significant expansion of global natural gas supply exerting downward price pressure; worsening climate stressors; disorderly global energy transition. - Upside factors - Sustained high hydrocarbon prices and accelerated NDS3 reforms could strengthen the outlook. - Balance of risks - Risks broadly balanced; implementation quality of NDS3 is critical—ambitious initiatives could yield misallocation and negatively affect public finances and growth if poorly implemented. ### Policy Priorities and Recommendations - Overarching policy focus - Maintain stability against global headwinds while accelerating reforms, building on progress implementing past recommendations (Annex VI). - Policy discussions emphasized: (i) sustaining fiscal discipline and accelerating revenue, expenditure and fiscal institutional reforms; (ii) safeguarding financial sector stability and deepening financial markets; (iii) enhancing the monetary policy operational framework; and (iv) intensifying structural reforms guided by NDS3. - Fiscal policy: enhance resilience and support diversification - Authorities plan to resume gradual fiscal consolidation from 2024. - NHPB estimated to remain consistent with the Permanent Income Hypothesis (PIH) benchmark (Text Figure 9). - 2024 budget envisages spending cuts worth 2 ppts of GDP from the 2023 outturn, mostly in capital expenditure; fiscal outturn up to Q3 2024 suggests cuts could be milder, closer to 1½ ppts of GDP. - Fiscal stance likely to tighten, with the NHPB projected to improve by around ¾ ppt of non-hydrocarbon GDP. - 2025 budget envisages broadly prudent spending plans amid the growth rebound; medium-term budget updated to reflect NDS3 spending needs with continued gradual consolidation. ### Authorities' Views - Authorities broadly concurred with staff’s economic assessment and risks. - They highlighted: - Significant growth boost from North Field LNG expansion. - Intensifying reform efforts to meet ambitious NDS3 targets. - Regional conflict had no visible impact on Qatar, including on LNG shipment. - Strong tourism and reforms related to permanent residency through real estate investments expected to boost the real estate sector. - 2023 policy measures to regulate real estate activities expected to mitigate potential risks. - Qatar’s strong fundamentals and policy buffers would help dampen negative impacts if downside risks materialize. *Source: IMF staff report — Chapter 2. AI in Qatar: Opportunities and Potential Economic Impact (from 1qatea2025001-print-pdf).* ### 14. Staff welcomed the authorities’ ### 14. Staff welcomed the authorities’ ### Fiscal anchor and fiscal prudence - Staff welcomed the authorities’ commitment to continued fiscal prudence and recommended adopting a fiscal anchor to support the strategy. - The PIH-based benchmark can serve as a medium-term fiscal anchor to ensure intergenerational equity. - Key long-term PIH parameters used in staff calculations: - Inflation and non-hydrocarbon real output growth = 2 percent - Population growth = 0.75 percent - Natural gas production volume = constant after NF expansion in 2030 - Nominal hydrocarbon price growth = 2 percent - Nominal returns on QIA assets and discount rate = both 4.75 percent - Staff recommendations related to fiscal management: - Save higher-than-expected hydrocarbon revenues to strengthen fiscal buffers. - During economic downturns, deploy some fiscal space to provide targeted support, while having a credible plan to guide the NHPB to return to the PIH-based fiscal anchor (with a view to eventually introducing a fiscal rule). - The assessment of fiscal stance would be more accurate if expenditures by government related entities (GREs) are also accounted for. - Update the PIH-based fiscal anchor periodically as the global energy transition unfolds to ensure realistic long-term oil price assumptions. ### Revenue diversification and tax reform - Revenue diversification should accelerate to enhance resilience and modernize the tax system given hydrocarbon revenue volatility and rising geopolitical tensions. - Priority reforms and expected impacts: - Introduce the value-added tax (VAT). - The tax authority has readied the infrastructure for VAT introduction. - Staff reiterated that the authorities accelerate the introduction of a broad-based VAT with a starting rate in line with the GCC treaty. - Estimated revenue gain: up to 1½ percent of GDP with a VAT rate of 5 percent. - VAT would help gather comprehensive information, facilitating other tax introduction and administration. - The initial growth and inflation impact of VAT introduction is estimated to be transitory and small. - Allowing businesses sufficient time to prepare (e.g., 12 months) is crucial for a smooth rollout. - Broaden the corporate income tax (CIT). - Foreign companies are already subject to 10 percent of CIT in Qatar. - Qatar is aiming to start implementation of the global minimum CIT on multinationals from the beginning of 2025, consistent with the global timetable. - Proceed in line with global trends to avoid revenue losses and minimize the compliance burden. - Consider introducing a CIT for domestic firms over the medium term (with appropriate thresholds) to broaden the tax base and allow a level playing field between domestic and foreign firms. ### Energy pricing, subsidies, and climate objectives - Gradually aligning domestic energy prices with corresponding export prices could increase revenue, generate savings, and support Qatar’s climate goals. - Current context and actions: - Domestic energy price differentials from international ones are lower in Qatar than in regional and EM peers. - To further reduce price differentials, lift caps on diesel and gasoline prices and gradually phase out remaining electricity subsidies. - Natural gas price differential (IEA, 2022) partially reflects domestic supply-demand dynamics and liquefaction/export capacity limits. - First step: improve transparency of domestic gas pricing to better understand disparity with export prices. - Expand liquefaction and export facilities alongside the North Field LNG expansion to allow export of extra domestic gas supply to generate additional revenue and support climate initiatives. - Gradually aligning domestic natural gas prices with export ones would incentivize private sector diversification beyond low energy cost. ### Spending efficiency, composition, and public investment - Continue improving spending efficiency and composition to strengthen fiscal sustainability and support NDS3 reforms. - Specific measures to contain and reprioritize spending: - Continue to contain the wage bill. - Qatar has a smaller wage bill (in percent of GDP) than regional peers. - Potential pressures ahead from more national graduates seeking public sector jobs and new government services to support reforms. - Rationalization measures: promote government efficiency (including greater digitalization), closely link headcount increases to efficient provision of new public services, incentivize Qataris to seek private sector jobs, tighten eligibility for benefits, and reduce staffing by natural attrition. - Reorient public spending toward higher returns. - Fiscal multipliers in Qatar have been stronger than in other GCC countries, especially for capital expenditure, but multipliers have fallen as the World Cup investment cycle matured. - Prioritize investment in building a knowledge-based economy, leveraging digital access and readiness to embrace artificial intelligence (AI), and enhancing climate resilience and sustainability—these could generate high returns and enable private sector development. - Avoid public sector initiatives that support unviable firms. - Use VAT and subsidy phase-out proceeds productively; provide targeted transfers to vulnerable households to strengthen social protection. - Strengthen public investment management. - IMF estimates suggest the most efficient public investors can achieve twice the growth impact from their investment than the least efficient ones. - Staff suggest room to further improve Qatar’s public investment efficiency and recommend benefit from the IMF’s Public Investment Management Assessment (PIMA) and/or Climate-PIMA. ### Fiscal multipliers: key findings (Box 1) - Overview: fiscal multipliers defined as non-hydrocarbon growth gains from government spending; analysis covers Qatar and GCC peers over past three decades. - Key empirical findings: - For the GCC, the average long-run fiscal multiplier for capital expenditure = 0.7 and is stronger and more persistent than that for current expenditure (the latter is statistically insignificant). - The Qatar-specific long-term cumulative multiplier for capital expenditure (based on the GCC panel regression and a country dummy for Qatar) is close to 1.5. - When capital stock is relatively high, capital spending multipliers for both Qatar and the GCC become insignificant. - Time-varying estimates using a 12-year rolling basis show stronger and more persistent growth impact from World Cup-related capital spending in the 2010s; as the infrastructure cycle matured, growth effects moderated. *Source: 1qatea2025001-print-pdf - 14. Staff welcomed the authorities’* ### 18. Welcome efforts to strengthen fiscal institutions pave the way to adopt a full- fledged ### Welcome efforts to strengthen fiscal institutions pave the way to adopt a full-fledged medium-term fiscal framework (MTFF) with enhanced fiscal risk management ### MTFF and fiscal framework - Extension of the medium-term budget to five years and progress in introducing program-based budgeting are encouraging and pave the way to introduce a full-fledged MTFF anchored by the PIH benchmark to strengthen fiscal sustainability and ensure priority spending. - The MTFF should: - Guide and be integrated into the annual budget process. - Feature performance-based allocations and strengthened budget execution to ensure compliance. - Be complemented by regular fiscal risk assessments and enhanced fiscal transparency. - IMF technical assistance (TA) on the MTFF can support the authorities’ efforts. - The MTFF and annual budget should include fiscal risk assessments, including risks from PPPs, and be underpinned by enhanced fiscal transparency. ### Managing fiscal risks from PPPs - Around QAR10 billion (US$2¾ billion) of PPP projects are in the pipeline, focusing on health, education, hospitality, and infrastructure. - Recommendations: - Adopt an appropriate risk-sharing and monitoring framework to manage potential fiscal risks, including contingent liabilities. - Underpin PPP arrangements with transparency and strong governance. - Fully integrate PPPs into the state budget and the MTFF. ### Sovereign asset-liability management - Establishing a sovereign asset-liability management framework encompassing the general government, including the QIA and GREs, would help coordinate investments for economic transformation and enhance asset-liability management. ### Authorities’ views on fiscal policy - Authorities reiterated commitment to fiscal discipline and broadly shared staff’s views on the fiscal strategy. - Noted that funding allocations for NDS3 initiatives were prudent with emphasis on public spending efficiency. - Progress noted in expanding program-based budgeting to eventually cover all sectors by 2025. - Ongoing expenditure review expected to generate savings in the medium term. - Authorities expressed initial interest in exploring a PIH-based fiscal anchor. - Authorities viewed fiscal risk from ongoing PPPs (mainly on operating and maintaining existing infrastructure) to be small. - Stressed that no subsidies on natural gas were provided, but expressed willingness to explore increasing transparency of domestic natural gas price setting. - Committed to diversify revenues and implement the CIT Pillar II in line with the global timetable; Cabinet recently approved a draft law amending some provisions of the Income Tax Law and referred it to the Shura Council. - Continued to assess appropriate timing for VAT introduction. - Debt management strategy takes into account the need for green financing and supporting domestic financial market deepening, in coordination with the QCB, under objective of gradually reducing government debt. ### Financial sector policy: maintain stability and deepen markets - Banking sector remains healthy thanks to robust buffers, diligent QCB policies and ample hydrocarbon liquidity, despite growth normalization and tighter financial conditions. - Recent QCB measures to reduce banks’ short-term foreign asset-liability mismatches and risks in exposure to a weaker real estate market are welcome. - QCB should make more granular data available (e.g., average maturity structure of banking sector foreign assets and liabilities, NPLs by sector) to enhance monitoring and facilitate risk assessment. - NPL ratio will likely remain contained as economic activity picks up and credit demand strengthens; continued diligence in supervision is important especially for banks with weaker asset qualities. - Qatar Development Bank (QDB) initiatives to support SMEs should be limited to viable but liquidity-constrained firms. - Sovereign-bank nexus is high; some banks have partly replaced foreign funding with public sector deposits, access to such deposits is reportedly uneven with smaller banks facing higher funding costs. - Ongoing initiatives to deepen domestic capital market would help banks diversify funding sources. - Bank holdings of public sector assets in gross terms are around 30 percent of total assets and could crowd out private sector credit, slowing private sector-led growth. - Banks’ net claims to the public sector were smaller at 1 percent of total loans in September 2024. ### Strengthening financial safety net and supervision - QCB initiatives to improve risk-based supervision, establish a deposit insurance scheme and formalize recovery and resolution frameworks are supported by IMF TAs. - Formalizing crisis management frameworks would enhance predictability, efficiency and confidence. - QCB should continue to review macroprudential policies and adjust as needed to mitigate macro-financial risks. - Staff recommended Qatar undertake an FSAP update (last FSAP concluded in 2007). ### Financial market deepening (FSS3 and related initiatives) - Third Financial Sector Strategy (FSS3), launched November 2023, emphasizes domestic financial market deepening: promote savings, offer borrowing and investment opportunities, develop insurance sector, foster fintech, and increase financial inclusion. - Initiatives include support to SMEs, accelerate digital transformation, expand financial services including advisory, expand regulatory sandboxes, and QFC digital asset framework for digital assets. - QCB exploring concept of a wholesale CBDC and has requested IMF TA. - Setting up primary dealers and a derivatives exchange will facilitate capital market deepening. - QCB launched its own Strategy 2024–30 in October 2024; key stakeholders should coordinate to ensure policy consistency and timely implementation. - Initiatives to foster more stable domestic funding would complement QCB measures in reducing banks’ reliance on short-term foreign funding. ### AML/CFT and financial crime efforts - Qatar made excellent progress in fighting financial crimes; FATF 2023 mutual evaluation acknowledges strengths in preventing financial crimes and law enforcement through improved risk assessment capacity and clearer policy priorities. - QCB banned financial institutions from using crypto assets; a beneficial ownership registry is being operationalized. - Recommendations: - Strengthen risk-based supervision of non-financial businesses and professions. - Ensure beneficial ownership information is accurate and easily accessible. - Further improve capacity of AML/CFT law enforcement agencies. ### Authorities’ views on financial sector - Authorities concurred with staff’s recommendation to continue exercising vigilance. - QCB highlighted newly introduced risk-based supervision and believed banks were well prepared to manage legacy real estate sector weaknesses. - QCB noted banks’ progress in lengthening average maturity of foreign liabilities including via issuance of medium-term notes, and commitment to regular risk reassessment. - Micro and macroprudential measures, including the counter-cyclical capital buffer, are periodically reviewed and would be dynamically adjusted. - Authorities supported staff’s call for deepening domestic capital markets and highlighted ongoing efforts including an initiative with the Ministry of Finance to build the domestic yield curve. ### Monetary policy: operational framework - Exchange rate peg continues to serve Qatar well as a credible monetary anchor, backed by ample external buffers, continued fiscal prudence and competitiveness-enhancing reforms. - Qatar’s monetary policy is broadly aligned with the U.S. Federal Reserve. - QCB cut policy interest rates three times, each time 5 basis points more than the US Federal Reserve did, narrowing the interest rate differential with the US fed funds rate. - Staff recommended QCB continue to adjust policy rates in line with the US Federal Reserve. - QCB’s enhanced liquidity management is welcome and could benefit from stronger coordination with the fiscal authority. ### Enhancing monetary policy framework - Key actions recommended: - Improve analytical capacity for liquidity forecasting and country risk premium assessment (as recommended by a recent IMF TA) to enhance liquidity management and monetary policy implementation. - Finalize upgrade to a new real-time gross settlement (RTGS) system to integrate wholesale payments, reduce risks and enhance efficiency in secured lending operations. - Over time, establish a wider and more stable policy interest rate corridor, develop a more active interbank market, and allow banks to base lending rates fully on market conditions by removing the cap on salary-based personal loans to enhance monetary policy transmission. - Strengthen central bank communication. ### Authorities’ views on monetary policy - Authorities agreed with staff’s assessment on the exchange rate regime and appreciated IMF TA on liquidity management. - Recent policy interest rate cuts (each 5 basis points more than the US Federal Reserve) were motivated by a relatively wide interest rate differential to the Fed funds rate, domestic macroeconomic conditions (growth normalization and low inflation), and excess liquidity in the financial system. - QCB noted recent policy moves did not have negative effects including on capital flows, and future policy decisions would be data driven. - QCB acknowledged improving the monetary policy operational framework is a medium-term objective and emphasized importance of communication. ### Structural reforms: building a knowledge-based and sustainable economy - Staff analysis: human capital is a large direct contributor to per-capita output and an amplifier of growth-enhancing impact of higher economic complexity; physical capital has similar albeit smaller effects. - Qatar has a large capital stock and top-notch infrastructure quality but labor productivity and economic complexity have substantial room to improve. - Reform priorities: - Build a highly skilled labor force. - Promote innovation and knowledge-spillovers (including through FDI and trade diversification) to boost economic complexity, supported by enhanced business efficiency. - Leverage advanced digital access and AI readiness for productivity gains. - Strengthen climate sustainability and generate “green” growth. ### Labor market and human capital actions - Attracting and retaining high-skilled expatriate workers: - Qatar currently has more semi-skilled expatriate workers than skilled or highly skilled ones. - Intensified Kafala reform would enhance expatriate labor market protection and flexibility. - Speedy implementation of new visa schemes (e.g., five-year Mustaqel residence visa and visa extension for graduating students) would improve labor force skills. - Strengthening the social safety net including the pension scheme would help. - Renewed 4-year collaboration program with ILO can support progress. - Enhancing nationals’ talent and private sector employment: - Education investment is bearing fruit; more outcome-based education spending could help close gap with OECD countries. - NDS3 target: have 20 percent of Qataris employed in the private sector. - Effective coordination across public and private sectors, education institutions, and youth associations is essential; use active labor market policies (reskilling, upskilling). - Leverage ILO expertise in setting sectoral Qatarization targets and active labor market policies. - Further benefiting from female talent: - Qatari women’s access to schooling is on par with or exceeds that of men in higher education, but a sizeable gender gap remains in labor force participation. - Recent efforts: allow flexible and remote work, lengthen paid maternity leaves in government agencies. - Continue efforts to increase female labor force participation, especially in the private sector; encourage female students toward subjects with private sector demand, provide entrepreneurship programs, and increase female representation in decision-making bodies. ### Boosting economic complexity: innovation, trade, FDI, business efficiency - Fostering innovation: - Patent applications rose rapidly over the last decade. - QIA establishing a venture capital “Fund of Funds.” - NDS3 aims to increase R&D funding from current 0.7 percent of GDP to 1.5 percent, with majority from private sector. - Need to enhance R&D spending efficiency and quality and improve intellectual property rights protection (e.g., patent and trademark protection). - Promoting trade diversification: - Progress limited, mainly in services export (transportation and tourism). - Recommendations: reduce non-tariff barriers, facilitate intra-GCC trade, upgrade trade infrastructure, liberalize services trade, promote free trade agreements, and leverage new trade corridors (Middle Corridor; India-Middle East-Europe Corridor). - Attracting FDI and boosting knowledge spillovers: - FDI inflows traditionally focused on hydrocarbons; recent rises in knowledge sectors (e.g., ICT). - Further reduce entry barriers for foreign firms and promote healthy competition. - Use PPPs and intra-GCC financial integration to help boost FDI. - Enhance human capital and innovation and strengthen SMEs’ access to technology via financing to facilitate domestic knowledge spillovers. - Improving business efficiency: - Qatar performs well on competitiveness indicators but could further ease access to finance for SMEs. - Reforms: protect legal rights of borrowers and lenders, simplify insolvency procedures, strengthen creditor assessment tools, and leverage fintech. - Streamline business regulations and procedures, improve transparency and accountability, deepen public sector digitalization. - If privatizing state assets, ensure strong governance and transparency, preserve state’s best interest, and use proceeds productively. ### Implementation, prioritization and coordination - Successful reform implementation hinges on proper prioritization, inter-agency coordination, effective execution, and careful management of policy spillovers. - Reforms should be sequenced to prioritize impactful measures and explore synergies. - Incentives to specialized economic zones and diversification clusters should target well-identified externalities, market and coordination failures, or under-provision of public input and are no substitute for broad-based structural reforms. - Periodic cost-benefit assessments will help rationalize incentives and keep them time-bound. ### Digitalization, AI, and climate agenda - Digitalization and AI: - Qatar’s digital infrastructure, quality and affordability are comparable to advanced economies. - Digital Agenda 2030 launched March 2024 to enhance digital innovation, expand e-government, develop digital skills, and refine regulatory frameworks. - Qatar is close to advanced economies in AI readiness; labor market has a large share of jobs that can benefit from AI rather than be replaced, making the country well-positioned to reap AI-driven productivity gains with limited job displacement risks. - Priorities: enhance digital skills, promote digital/AI penetration in production, strengthen cybersecurity risk management, and facilitate job transitions. - Climate agenda: - Early-2024: Qatar raised $2.5 billion in a debut green deal under its sovereign green financing framework. - June 2024: QCB launched the ESG and Sustainability Strategy for the financial sector. - Share of energy capacity from renewables reached about 9 percent in 2023 against a target of 20 percent by 2030. - Recommendations: gradually phase out remaining energy subsidies and reduce domestic energy price differentials from export prices, increase green investment, promote climate financing, enhance interagency coordination, and upgrade regulatory framework. *International Monetary Fund — Selected chapter content* ### Box 2. AI in Qatar: Opportunities and Potential Economic Impact ### Box 2. AI in Qatar: Opportunities and Potential Economic Impact ### Policy framework, investments, and readiness - Qatar released its first National AI Strategy in 2019, focusing on education, data access, employment, business, research, and ethics. - The AI Committee was established in 2021 to coordinate efforts from ministries, universities, and financial institutions. - A $2.5 billion AI investment package was announced in May 2024. - AI-related research has surged. - Overall, Qatar is close to AEs in its AI readiness. ### Labor market exposure and complementarities - About 37 percent of the labor force in Qatar is exposed to AI. - This represents an 18 ppts increase over a decade. - Qatar’s AI exposure is comparable to the EM average but lower than the AE average of 58 percent. - Staff analysis (IMF (2023)) suggests about 75 percent of the high AI exposure jobs in Qatar have high “complementarity”—workers in those jobs are more likely to benefit from AI-driven productivity gains than being replaced. - Qatar’s labor market opportunity-to-risk ratio from AI exposure is significantly higher than EM or AE averages. - The box presents occupation-level measures of Exposure and Complementarity for 2023 (higher value = higher exposure/complementarity), with occupations listed including: Managers; Professionals; Technicians; Clerks; Services and sales workers; Plant and machine operators; Skilled agricultural workers; Craft and related trades workers; Elementary occupations. ### Authorities’ views and policy priorities - Authorities concurred with staff’s call to accelerate structural reforms and noted a large number of initiatives and projects underway guided by NDS3. - The newly established National Planning Council highlighted its role in prioritizing reforms, ensuring inter-agency coordination and monitoring progress. - Authorities agreed with staff recommendation to focus reforms on: - boosting human capital and innovation, - enhancing the business environment, - attracting FDI, - promoting exports. - Authorities agreed that Qatar was well placed to leverage AI for productivity gains and highlighted Qatar’s comparative advantage in energy cost and reliability to attract data centers, around which an ecosystem could be built to enhance domestic value added. *Source: IMF staff calculations and text from Box 2. AI in Qatar: Opportunities and Potential Economic Impact.* ### Box 2. AI in Qatar: Opportunities and Potential Economic Impact (concluded) ### Box 2. AI in Qatar: Opportunities and Potential Economic Impact (concluded) ### Private sector labor shifts and workforce composition - Private sector employment has grown by around 27 percent over the last decade. - The number of technicians and professionals—two job categories with high AI exposure and complementarity—has increased by over 90 percent, significantly enhancing Qatar’s potential to benefit from AI adoption. ### Sectoral exposure and NDS3 clusters - “Enabling clusters” identified in NDS3 (IT & digital, financial services, and education) concentrate in the high AI exposure and complementarity quadrant when matched with the AI exposure-complementarity matrix. - “Growth clusters” identified in NDS3 (manufacturing, logistics, and tourism) tend to have more limited AI exposure. ### Scenario analysis and potential productivity impact - Staff analysis indicates potential gains in labor productivity from AI penetration in Qatar. - Under an optimistic scenario—characterized by successful reforms to enhance human capital, innovation, and private sector growth that allow a more rapid increase in the share of jobs exposed to AI and faster AI adoption than under the baseline—labor productivity growth could be lifted by an average of 1 ppt annually (above the baseline) over the medium term. ### Summary implications for policy and reform priorities - Strengthening human capital, fostering innovation, and supporting private sector growth are central to realizing the optimistic productivity gains from AI. - Targeted support to enabling clusters (IT & digital, financial services, education) can harness AI-driven productivity gains, while growth clusters may require different strategies given their more limited AI exposure. *Sources: IMF staff calculations.* ### Annex I. Overview of Qatar’s Third National Development Strategy ### Annex I. Overview of Qatar’s Third National Development Strategy ### Overview and objectives - NDS3 (issued January 2024) aims for a transformation toward a private sector-led, knowledge-based, and more sustainable economy, covering the last miles of Qatar National Vision (QNV) 2030. - Transition across NDS cycles: from NDS1 (2011–16) and NDS2 (2018–22) — public sector-driven, infrastructure-focused — to NDS3 (2024–30) — empowering private sector, innovation, and high-value sectors. - NDS3 intends to leverage large financial resources, enhanced human capital, and high-quality infrastructure built over the last decade and sets ambitious, numerically specified targets. ### Progress since QNV 2030 and key challenges - Historical progress (2008–23): average economic growth of 5½ percent; share of non-hydrocarbon economy rose by more than 10 percentage points to 63 ppts. - Improvements: education and health systems, labor market (including expatriate workers), and government effectiveness. - Identified limitations and challenges: - Diversification in fiscal revenue and exports lags some GCC peers. - Relatively low non-hydrocarbon output growth in recent years with declining labor productivity. - Costly diversification model driven largely by public sector spending with implications for fiscal sustainability. - Incentives and regulatory impediments that hinder private sector development, entrepreneurship, and innovation. - Majority of employment remains less skilled despite increases in skilled and highly skilled employment. - Barriers to market entry and FDI, immature innovation ecosystem, and insufficient human capital. - Global energy transition increases urgency to accelerate diversification. ### Strategic role of the state - NDS3 frames the state as an “enabler” of private sector-driven growth rather than primary provider. - Policy levers highlighted: harmonize economic zones to attract FDI, boost international trade (additional trade agreements), expand Public-Private Partnerships (PPP), and develop “diversification clusters” to build comparative advantages. ### NDS3: Seven strategic outcomes with numerical targets - Growth model - Achieve an average annual real GDP growth, both for total and non-hydrocarbon, of 4 percent (the past five-year-average was at 0.8 and 1.5 percent, respectively). - Attract $100 billion FDI inflows (cumulatively over 2024–30). - Create a top-10 global business environment. - Increase R&D spending to 1.5 percent of GDP (currently at 0.7 percent of GDP) with 60 percent from the private sector. - Improve labor productivity growth to 2 percent annually (the past five-year-average was close to zero). - Fiscal policy - Reach a fiscal surplus of 5½ percent of GDP by 2030 (the past five-year-average was 3 percent). - Maintain current sovereign credit ratings of AA/Aa2 with stable outlook. - Achieve manageable expenditure growth (below the non-hydrocarbon output growth rate). - Reduce procyclicality of spending, implement program-based budgeting, and enhance debt management including sovereign green financing. - Human capital - Skilled labor force to exceed 46 percent of the total by 2030 (currently at 28 percent). - Increase Qatari private sector employment to 20 percent of the Qatari workforce (currently at 17 percent). - Promote STEM education, upskilling programs with private sector participation, labor immigration reforms, and new visa schemes for elite talent and entrepreneurs. - Inclusiveness - Maintain a high fertility rate (of 3 percent). - Increase economic participation of people with disabilities to 30 percent by 2030. - Launch marriage and family support programs, enhance maternity leave, promote financial literacy, and target a 10 percent volunteer rate. - Health - Target life expectancy of above 82 years by 2030. - Achieve a 36 percent reduction in non-communicable disease mortality by 2030. - Target fewer than 4.9 traffic deaths per 100,000 population. - Resident and visitor satisfaction scores targeted to exceed 88 percent. - Climate and sustainability - Reduce greenhouse gas emissions by 25 percent relative to the business-as-usual scenario by 2030. - Expand renewable energy capacity to 4 GW. - Protect 30 percent of land and marine areas; restore 30 percent of degraded natural habitats. - Reduce groundwater extraction by 70 percent; per-capita water consumption below 310 liters per day. - Deploy carbon capture technologies, expand biodiversity protection, improve water conservation, and foster circular economy practices. - Government efficiency - Target to rank in the top 10 percent on the Government Effectiveness Index. - 90 percent of services digitalized by 2030. - Launch centralized performance tracking systems, improve data governance, and enhance accountability and transparency. ### Thematic evolution across NDS cycles (high-level) - Economic diversification: shift from institutional capacity and infrastructure to private sector involvement, regulatory reform, knowledge-based economy, and high-value sectors with technology and innovation. - Sustainability: progression from efficient resource use and sustainable infrastructure to emissions reductions, circular economy initiatives, and biodiversity protection. - Human capital: from basic education and labor market reforms toward readiness for the digital economy, upskilling, and entrepreneurship. - Driver of growth and infrastructure: move from public sector-led large-scale infrastructure to PPPs, private-sector-supporting infrastructure, renewable energy integration, and sustainable digital infrastructure. ### External sector assessment (selected findings and projections) - Overall assessment - Qatar’s external position moderated in 2023 and was assessed to be moderately stronger than the level implied by medium-term fundamentals and desirable policies. - Tourism remained robust; hydrocarbon prices normalized and exports declined in 2023. - In 2024H1, tourism remained strong; hydrocarbon export volume remained weaker than historical levels, capping the current account surplus. - In the medium term, hydrocarbon prices are projected to progressively decline but export volume set to increase owing to significant LNG production ramp-up; imports expected to strengthen with domestic demand recovery. Current account gap expected to continue narrowing. - Foreign assets and liabilities - Central bank reserve accumulation was modest as the current account surplus narrowed and large asset acquisition abroad continued, including by the sovereign wealth fund (QIA). - External debt (liabilities) rose from 116 percent of GDP in 2022 to 123 percent of GDP in 2023 as nominal GDP shrank. - Central bank reserves stood at US$53.8 billion in November 2024, up US$2 billion from 2023. - QCB foreign reserves and sizeable QIA foreign assets together are estimated to have exceeded 200 percent of GDP in 2023. - Commercial banks’ external liability remained broadly unchanged, leaving the net foreign liability relatively large. - Current account - Current account surplus fell from a decade high in 2022 by nearly 10 percentage points of GDP to 17 percent of GDP in 2023. - 2024H1 current account surplus little changed from 2023H1 (US$20 billion). - Current account surplus expected to abate to 16½ percent of GDP in 2024 and remain at around 15½ percent of GDP in the medium term. - Staff assessment: 2023 external position moderately stronger than fundamentals; EBA-Lite yields a positive CA gap of 2.0 percent of GDP; REER regression model suggests a negative CA gap (–4.7 percent of GDP) but deemed less suitable given the currency peg. - Real exchange rate (REER) - Riyal pegged to the U.S. dollar at 3.64 since July 2001. - NEER appreciated by 1 percent in 2023, similar to the US; REER weakened by 1 percent in 2023. - Through November 2024, REER depreciated somewhat from the same period in 2023. - Staff assessment: based on CA gap of 2.0 and an elasticity of 0.3, REER assessed as undervalued by 5.6 percent. The EBA-lite REER model suggests an overvaluation of 13.6 percent. - Capital and financial accounts - Capital and financial account weakened in 2023 with composition shifts: net portfolio outflows rose by nearly 10 percentage points of GDP to 15 percent of GDP (portfolio investments abroad 11 percent of GDP); net other investment outflows declined by 16 percentage points to 1 percent of GDP. - Overseas investment declined and net reduction in liabilities mostly by commercial banks followed QCB measures. - In 2024Q2, net portfolio outflows abated while net incurrence of other investment liabilities resumed. - Assessment: lack of detailed information on financial flows complicates analysis; strong foreign asset position (including sizable QIA assets) limits risks and vulnerabilities related to capital flows. - FX intervention and reserves adequacy - Large current account surplus translated into a moderate increase in central bank foreign reserves in 2023, by US$4 billion to US$51.5 billion, equivalent to: - 24 percent of GDP - 7.8 months of prospective imports - 196 percent of short-term external debt - an estimated 59 percent of the IMF’s reserve adequacy metric (ARA, up from 52 percent in 2022) - Much of the current account surplus estimated to have been invested by the QIA overseas; in 2024H1, foreign reserve accumulation ($1 billion) remained more modest than implied by the US$20 billion current account surplus. - Assessment: Qatar’s “overall” FX reserve coverage was adequate in 2023. QCB foreign reserves complemented by large QIA foreign assets, estimated at 220 percent of GDP in 2023; together they account for about 600 percent of the ARA metric, well above the 100 percent adequacy benchmark. ### Potential policy responses (as noted in Annex II) - Preserve fiscal prudence and reorient spending to support the reform agenda. - Accelerate revenue diversification toward non-hydrocarbon sources. - Implement structural reforms to enhance productivity and competitiveness as envisaged under NDS3 and QNV 2030 to raise private investment and reduce the saving-investment gap. *Source: Annex I. Overview of Qatar’s Third National Development Strategy (from the provided IMF chapter).* ### 1. Nowcasting generates real-time forecasts for key economic indicators where the ### 1. Nowcasting generates real-time forecasts for key economic indicators where the ### Overview: purpose and suitability - Nowcasting fills gaps when official data are unavailable or delayed by analyzing high-frequency macroeconomic indicators. - Example: Qatar publishes GDP data with a lag of around 2-3 quarters, creating demand for timelier assessment for policy makers and businesses. - Nowcasting models can be updated regularly with new data, keeping estimates relevant amid changing economic conditions. - Technique is particularly suitable where high-frequency indicators are abundant and published timely, as in the case of Qatar. ### Model development and methodological steps - A nowcasting model for Qatar’s non-hydrocarbon economy is developed based on previous IMF work. - Key development steps: - Select predictive variables: - Choose a wide range of economic and financial indicators to capture domestic, regional and global conditions affecting Qatar’s non-hydrocarbon economy. - Selection criteria include predictive power (pairwise correlation with Qatar’s non-hydrocarbon GDP), data availability, and minimal lag time. - Balance the number of predictors and the size of the training data to avoid overfitting. - Select nowcasting models: - Process selected time series through machine learning algorithms. - Models trained include Support Vector Machines (SVMs), Random Forests, and Elastic Net. - Model performance evaluated using metrics such as out-of-sample root-mean-squared error (RMSE); best-performing models selected. - Identify contributions of predictive variables: - Apply Shapley decomposition to break down each variable’s contribution to nowcast results. - Use identified key drivers to refine and iterate the model. ### Innovations introduced to the Qatar framework - Big data approach to variable selection: - A Stata program scrapes Haver and CEIC databases, identifying relevant keywords in millions of data series targeting Qatar and key trading partners. - Program selects 1,300 Qatar-specific series and 1,200 series related to Qatar’s trading partners. - The 2,500 variables undergo pairwise correlations against Qatar’s non-hydrocarbon GDP. - Those with the highest correlations (positive and negative) are kept; economic judgement and sectoral balance narrow the pool to 13 variables. - Further refinements through Shapley decomposition of nowcasting results are possible. - Use of machine learning (ML) models: - ML models handle large and complex datasets and capture non-linear relationships that ARIMA models might miss. - ML models adapt to changing patterns, learn from outliers and non-stationarity, and potentially yield more accurate and timelier GDP nowcasts. ### Results, model selection, and fit - Comparative performance: - Various nowcasting models compared by out-of-sample performance. - Support Vector Machine (RBF) model has the lowest RMSE and is the most effective for Qatar’s non-hydrocarbon GDP growth prediction. - An average RMSE of 1.4 across the best models indicates performance comparable to regional peers. - Fit to historical data and recent nowcasts: - Overall fit shown up to 2023Q4. - Nowcasting results up to Q3 2024 point to a gradual recovery from the post-World Cup growth trough. - Variable coverage in final model: - Total variables in final Qatar model: 13 variables. - Nine variables are Qatar-specific, covering: - Real sector (e.g., inflation and oil activities). - External sector (e.g., export oil price to China). - Financial sector (e.g., 3-month deposit rate and credit facilities). - Four series capture economic activities in Qatar’s key trading partners. ### Caveats and limitations - ML-based nowcasting framework caveats: - ML models focus on identifying statistical patterns; variable and model selections aim to maximize predictive power. - Results, including variable contributions, should not be interpreted the same as in regression analysis, which is usually grounded in economic theories. ### Key statistics and timestamps - GDP publication lag example: around 2-3 quarters. - Initial scraped series: 1,300 Qatar-specific series and 1,200 trading-partner series (total 2,500). - Final pooled variables: 13 variables. - Model performance: average RMSE of 1.4 across best models. - Nowcasting horizon published: Nowcasting up to Q3 2024. - Historical fit shown up to 2023Q4. ### Final list: Qatar predictive variables used in the final model (Table III.1) - Qatar Specific — Real Sector: - Qatar: Consumer Price Index (NSA, 2018=100) - Qatar: Oil Rig Count (BHGE) - Qatar Specific — Monetary and Financial Sector: - Qatar: M1: Currency in Circulation - Qatar: 3 Months Deposit Rate - Qatari Banks: Liabilities to Qatar Central Bank - Qatar Stock Exchange: Shares Traded in Real Estate - Qatar Specific — External Sector: - Qatar: Export Oil Price to China - Qatar: Imports of Motor Vehicle from Japan - Qatar: Exports to Japan (JPY Bn) - Trading Partners: - Saudi Arabia: Imports (NSA, Mil. Riyals) - U.S.: Consumer Credit Outstanding (NSA, EOP, Bil.$) - Dubai PMI: Total Economy Output - India PMI: Services Employment *Source: IMF staff calculations.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors ### Coverage and consolidation issues - Fiscal data cover the central government; staff encourages expanding coverage to include the broader public sector and the QIA. - Consolidation matrix fields shown (coverage status indicators present in source): Debt securities, Loans, IPSGSs, Other accounts payable, Market value, Nominal value, Face value, Non-consolidated, Consolidated, Currency & deposits, Holder, Issuer, Non-cash basis, Cash basis. - Public sector units listed in matrix: Budget. central govt; Extra-budget. funds; Social security funds; State govt.; Local govt.; Nonfin pub. corp.; Central bank; Oth. pub. fin. corp. - Note: Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. - IPSGSs defined as: Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities. ### Public debt structure indicators (figures and targets) - Authorities' targets: - Debt-to-GDP ratio: below 40 percent. - Mix of local and external debt: broadly 50/50, and eventually 60/40. - Residual maturity reported: 6. years. - Debt by currency, holder, governing law, instruments, and maturity are presented on general/central government perimeters in figures (no numerical breakdown beyond chart axes provided in source text). ### Baseline scenario and public debt projections (percent of GDP unless indicated otherwise) - Actual public debt, 2023: 43.7 - Projected public debt: - 2024: 40.5 - 2025: 39.6 - 2026: 38.3 - 2027: 36.3 - 2028: 35.8 - 2029: 35.7 - 2030: 35.8 - 2031: 36.0 - 2032: 36.2 - 2033: 36.5 - Change in public debt: - 2024: 1.1 - 2025: -3.2 - 2026: -0.9 - 2027: -1.4 - 2028: -1.9 - 2029: -0.6 - 2030: -0.1 - 2031: 0.1 - 2032: 0.2 - 2033: 0.2 - Contribution of identified flows to change in public debt: - 2024: 0.3 - 2025: -3.0 - 2026: -1.2 - 2027: -1.3 - 2028: -2.0 - 2029: -0.5 - 2030: 0.2 - 2031: -0.1 - 2032: 0.0 - 2033: 0.0 - Primary deficit (percent of GDP): - 2023: -7.0 - 2024: -1.6 - 2025: -3.7 - 2026: -5.9 - 2027: -5.8 - 2028: -5.4 - 2029: -5.7 - 2030: -5.7 - 2031: -5.7 - 2032: -5.7 - 2033: -5.7 - Noninterest revenues (percent of GDP): - 2023: 32.8 - 2024: 26.2 - 2025: 28.7 - 2026: 30.2 - 2027: 28.8 - 2028: 28.2 - 2029: 28.5 - 2030: 28.5 - 2031: 28.5 - 2032: 28.5 - 2033: 28.5 - Noninterest expenditures (percent of GDP): - 2023: 25.8 - 2024: 24.6 - 2025: 25.0 - 2026: 24.3 - 2027: 23.0 - 2028: 22.8 - 2029: 22.8 - 2030: 22.8 - 2031: 22.8 - 2032: 22.8 - 2033: 22.8 - Automatic debt dynamics (percent of GDP contributions): - 2023: 4.5 - 2024: -0.6 - 2025: 0.1 - 2026: -1.2 - 2027: -1.9 - 2028: -0.3 - 2029: 0.3 - 2030: 0.1 - 2031: 0.1 - 2032: 0.1 - 2033: 0.2 - Real interest rate and relative inflation (components): - Real interest rate and relative inflation: 1.4 0.2 1.1 0.8 0.9 0.9 0.8 0.8 0.8 0.8 0.9 (series across years as in source) - Real interest rate: 5.0 0.0 1.6 0.9 1.2 1.1 0.9 0.8 0.8 0.8 0.9 - Relative inflation: -3.6 0.2 -0.5 -0.1 -0.3 -0.2 -0.1 0.0 0.0 0.0 0.0 - Real growth rate (series in source includes negative values and truncation): -0.5 -0.7 -1.0 -2.0 -2.8 -1.2 -0.6 -0.7 -0.7 -0.7 -0.7... - Other identified flows: - 2023: 2.7 - 2024: -0.8 - 2025: 2.4 - 2026: 5.8 - 2027: 5.7 - 2028: 5.3 - 2029: 5.6 - 2030: 5.6 - 2031: 5.6 - 2032: 5.6 - Contribution of residual: - 2023: 0.8 - 2024: -0.2 - 2025: 0.3 - 2026: 0.0 - 2027: 0.0 - 2028: -0.1 - 2029: -0.2 - 2030: 0.2 - 2031: 0.3 - 2032: 0.2 - 2033: 0.2 - Gross financing needs (GFN): - 2023: -2.1 - 2024: 2.9 - 2025: -0.4 - 2026: -3.3 - 2027: -3.4 - 2028: -2.9 - 2029: -2.8 - 2030: -2.2 - 2031: -1.5 - 2032: -1.2 - 2033: -0.7 - Debt service (component of GFN): - 2023: 4.9 - 2024: 4.5 - 2025: 3.4 - 2026: 2.6 - 2027: 2.4 - 2028: 2.5 - 2029: 2.9 - 2030: 3.5 - 2031: 4.2 - 2032: 4.6 - 2033: 5.0 - Debt service by currency: - Local currency: 1.7 2.8 2.3 2.1 1.9 2.0 2.4 3.0 3.7 4.0 4.5 - Foreign currency: 3.2 1.6 1.0 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 - Memo indicators: - Real GDP growth (percent): 1.2 1.7 2.4 5.2 7.9 3.5 1.6 2.0 2.0 2.0 2.0 - Inflation (GDP deflator; percent): -10.7 3.2 -0.5 1.2 0.4 0.9 1.4 2.0 2.0 2.0 2.0 - Nominal GDP growth (percent): -9.6 4.9 1.9 6.5 8.3 4.4 2.9 4.0 4.0 4.0 4.0 - Effective interest rate (percent): 0.0 3.2 3.4 3.6 3.8 3.9 4.1 4.2 4.2 4.3 4.4 - Commentary: The public debt ratio is projected to remain stable reflecting the sizeable primary surplus, stable economic conditions, and the objective of developing the domestic capital market. ### Near-term and medium-term risk assessment - Near-term risks assessed as low. - Logit stress probability (LSP) to predict stress in [t+1, t+2]: - 2020→2021-22: 0.535 - 2021→2022-23: 0.260 - 2022→2023-24: 0.040 - 2023→2024-25: 0.008 - Change in LSP: - 0.369 -0.275 -0.220 -0.032 (series by year as in source) - Drivers of change in LSP (examples given across years, exact series in source): - Institutional quality: -0.035 -0.026 -0.003 0.000 - Cyclical position: 0.236 0.354 -0.241 -0.031 - Debt burden & buffers: 0.022 -0.339 -0.034 0.015 - Global conditions: 0.162 -0.272 0.073 -0.013 - Probability metrics for 2024-2025: - Prob. of missed crisis, 2024-2025 (if stress not predicted): 0.0 pct. - Prob. of false alarm, 2024-2025 (if stress predicted): 83.1 pct. - Mechanical indicators and module outputs: - Debt fanchart module: Fanchart width 88.7 1.3 (percent of GDP) - Probability of debt non-stabilization (percent): 4.6 0.0 - Terminal debt-to-GDP x1: 2.10.3 (as presented in source) - Debt fanchart index (DFI): 1.6 → Risk signal: 3/Moderate - Average baseline GFN (percent of GDP): -1.7 -0.6 - Initial Banks' claims on the gen. govt (pct bank assets): 15.5 5.0 - Change in banks' claims in stress (pct banks' assets): 1.5 0.5 - GFN financeability index (GFI): 5.0 → Risk signal: 4/Low - Medium-term index and final assessment: - Final assessment: Medium-term risks assessed as low, consistent with mechanical "low" signal. - Prob. of missed crisis, 2024-2029, if stress not predicted: 9.1 pct. - Prob. of false alarms, 2024-2029, if stress predicted: 48.9 pct. - Commentary: Large net financial assets held by the sovereign wealth fund mitigate risks. Gross financing needs under the stress scenario are small. ### Realism of baseline assumptions and fiscal adjustment - Realism analysis does not point to major concerns; the adjustment proposed by the authorities is not overly optimistic and aligns with historical behavior. - Forecast track record and comparator groups considered: Emerging Markets, Commodity Exporter, Surveillance. - Laubach (2009) rule referenced: a linear rule assuming bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio (as cited in source). ### Long-term risk assessment and triggered modules - Overall assessment: Risks related to large amortization are low; baseline path suggests debt ratio would remain low and stable. - Long-term modules covered: Large amortizations, Pensions, Health, Climate change (Adaptation and Mitigation), Natural Resources. - Medium-term extrapolations and long-run projections are presented (charts in source) showing GFN-to-GDP ratio and Total Public Debt-to-GDP Ratio under scenarios: Baseline with t+5; Baseline with t+5 and DSPB; Historical 10-year average. ### Pensions and demographics - Pension financing needs assessed as low. - Pension system covers Qatari nationals, around 10% of Qatar's total population. - Key revisions made in 2023 enhanced system sustainability; authorities plan to conduct and publish their own sustainability study. - Permanent adjustment needed in the pension system to keep pension assets positive for: - 30 years: 0.1% (pp of GDP per year) - 50 years: 0.7% (pp of GDP per year) - Until 2100: 1.2% (pp of GDP per year) - Charts show Pension Financing Needs and Total Benefits Paid series across projection horizons (percent of GDP). ### Natural resources - Staff assesses that risks from slower production of natural gas than under the baseline to maintain reserves would have limited risks to the debt ratio. - Charts present GFN-to-GDP Ratio and Total Public Debt-to-GDP Ratio under Baseline: Custom and Natural Resources scenarios over 2016–2052. *Source: IMF staff estimates and projections (figures and tables as presented in the chapter "5. Debt consolidation across sectors").* ### Annex V. Risk Assessment Matrix ### Annex V. Risk Assessment Matrix ### Global Risks - Intensification of regional conflict(s). - Likelihood: High; Expected impact if realized: Medium. - Description: Escalation or spread of the conflict in Gaza and Israel, Russia’s war in Ukraine, and/or other regional conflicts or terrorism disrupt trade (e.g., energy, food, tourism, supply chains), remittances, FDI and financial flows, and payment systems, and lead to refugee flows. - Expected impact summary: The impact would depend on the nature of the event. The shock could translate into higher global hydrocarbon prices, but there is also the risk of LNG export disruption—the overall impact on Qatar is highly uncertain. Intensification of regional conflict(s) could also weaken investor confidence and disrupt supply chain, tourism, and capital flows. - Policy response: The policy response would depend on the nature of the shock. Qatar has fiscal space to respond to a negative shock. The central bank should provide adequate liquidity in the banking system if needed. Continue to closely monitor financial institutions. - Commodity price volatility. - Likelihood: High; Expected impact if realized: High. - Description: Supply and demand fluctuations (e.g., due to conflicts, export restrictions, OPEC+ decisions, and green transition) cause recurrent commodity price volatility, external and fiscal pressures and food insecurity in EMDEs, cross-border spillovers, and social and economic instability. - Expected impact summary: Qatar’s ongoing LNG production expansion will raise the economy’s sensitivity to energy price volatility. Higher-than-projected energy prices could strengthen fiscal and external positions, and non-hydrocarbon output growth as ample hydrocarbon liquidity and positive private sector confidence could boost consumption and investment. Pressures to increase public spending could rise. Lower oil prices would weaken the external and fiscal balances, and growth. - Policy response: The authorities should implement a medium-term fiscal framework which helps insulate public spending from oil price volatility. Diversifying the revenue base toward more non-hydrocarbon sources would reduce revenue sensitivity to energy price volatility. Accelerate structural reforms to advance economic diversification. - Global growth downside surprise. - Likelihood: Medium; Expected impact if realized: Medium. - Description: Growth slowdown in major economies, including due to supply disruptions, tight monetary policy, rising corporate bankruptcies, or a deeper-than-envisaged real estate sector contraction, with adverse spillovers through trade and financial channels, triggering sudden stops in some EMDEs. (Low probability is assigned to surprise acceleration in global growth). - Expected impact summary: Lower external demand reduces hydrocarbon export prices, weakening fiscal and external positions which are currently strong. Slower global growth would also weigh on domestic growth, affecting banking sector asset quality. Global financial market corrections may lead to capital outflows and increase financial stability risks, including due to banks’ still sizeable exposure to foreign funding. - Policy response: Qatar has fiscal space to respond to a major growth slowdown. Fiscal policy should be anchored in a medium-term framework to reduce the risk of procyclicality. Continue to closely monitor banking sector developments to maintain financial stability. Accelerate structural reforms to boost economic diversification and non-hydrocarbon potential output. - Monetary policy calibration. - Likelihood: Medium; Expected impact if realized: Low. - Description: Amid elevated uncertainty and data surprises, monetary policy stances in major countries turn out to be too loose, hindering disinflation, or too tight for too long than warranted, stifling growth domestically and globally, and increasing capital flow and exchange rate volatility in EMDEs. - Expected impact summary: Consistent with the exchange rate peg, monetary policy in Qatar would closely follow that of the U.S. As domestic inflationary pressure remains low and growth continues to normalize from the World Cup-driven boom, the risk that a too loose monetary stance could de-anchor inflation expectations is limited. On the other hand, a monetary stance too tight for too long than warranted could negatively affect demand, but the ongoing public investment and spillovers from the North Field LNG expansion will support growth. - Policy response: Maintain monetary policy and liquidity management that are consistent with the currency peg. Continue to closely monitor banking sector developments to ensure financial stability. If growth is negatively affected by unduly tight (imported) monetary policy stance, some fiscal space could be deployed to provide targeted support while maintaining broad fiscal prudence. - Systemic financial instability. - Likelihood: Medium; Expected impact if realized: Low. - Description: High interest rates and risk premia, and sudden asset repricing amid economic slowdowns and policy uncertainty (including from elections) trigger market dislocations, with cross-border spillovers and an adverse macro-financial feedback loop putting weak banks and NBFIs under pressure. - Expected impact summary: Tighter global financial conditions would increase debt service and financing costs, and increase the liquidity risk for domestic banks reliant on foreign funding as banks’ net foreign liabilities remain relatively high. Such risks are however mitigated by Qatar’s large financial buffers, favorable market access, high sovereign credit ratings, and banks’ reduced exposure to nonresident deposits. - Policy response: Maintain prudent financial sector policy and closely monitor risks and vulnerabilities related to financial institutions, including through stress tests and thematic inspections. Provide liquidity to the financial system if needed, compatible with the currency peg. - Deepening geoeconomic fragmentation. - Likelihood: High; Expected impact if realized: Medium. - Description: Broader conflicts, inward-oriented policies, and weakened international cooperation result in a less efficient configuration of trade and FDI, supply disruptions, protectionism, policy uncertainty, technological and payments systems fragmentation, rising shipping and input costs, financial instability, a fracturing of international monetary system, and lower growth. - Expected impact summary: Supply disruptions and higher input costs would accelerate inflation. Lower FDI and trade would dampen output growth and the pace of economic diversification. The fiscal and external accounts would benefit if the price of and demand for the nation’s natural gas strengthen. - Policy response: Accelerate fiscal and structural reforms to boost potential non-hydrocarbon output growth, economic diversification, and private investment. Provide targeted support to the most vulnerable against higher inflation. Maintain prudent financial sector policy to ensure financial stability. - Cyberthreats. - Likelihood: High; Expected impact if realized: Medium. - Description: Cyberattacks on physical or digital infrastructure (including digital currency and crypto assets), technical failures, or misuse of AI technologies trigger financial and economic instability. - Expected impact summary: As the nation continues to enhance its global visibility and digitalization, cyberthreats have reportedly increased significantly. Cyberattacks would, for instance, lead to financial losses for individuals and businesses, the theft of sensitive information, and disruptions in key operations (businesses, transportation, or power). - Policy response: Qatar has expanded its capacity to contain cyberthreats by creating the National Cybersecurity Agency in 2021. A National Cybersecurity Strategy 2024-30 has been launched in September 2024 to further enhance legislation, coordinate with the ICT sector, and strike a balance between ensuring cybersecurity and promoting innovation. Effective implementation of the strategy, and continued close monitoring and supervision including of the banking and payment systems are key. - Climate change. - Likelihood: Medium; Expected impact if realized: High. - Description: Extreme climate events driven by rising temperatures cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. A disorderly transition to net-zero emissions and regulatory uncertainty lead to stranded assets and low investment. - Expected impact summary: Qatar’s ecosystem is highly vulnerable to climate shocks. Climate stressors have a significant impact on water, temperature, and sea level. With limited water resources and increasing temperatures, adaptation costs are likely to increase rapidly. Extreme climate events in partner countries could affect Qatar. A disorderly energy transition could affect Qatar’s hydrocarbon revenue and hence the fiscal and external positions. - Policy response: In line with Qatar National Vision 2030, continue working on various initiatives, including renewable energy, green building practices, sustainable transportation, and education and awareness campaigns. The Climate Change Action Plan identifies a number of mitigation and adaptation measures across various sectors (healthcare, biodiversity, water management and infrastructure) to ensure the implementation the National Environment and Climate Change Strategy and the achievement of key goals including 25 percent reduction in GHG emissions by 2030. ### Domestic Risks - Real estate market weakness. - Likelihood: Medium; Expected impact if realized: Medium. - Description: Property prices remain weak amid oversupply, negatively affecting the banking system and the broader economy. - Expected impact summary: Bank asset quality could weaken, and the construction sector would come under pressure, potentially dampening credit and non-hydrocarbon output growth. On the other hand, banks’ exposure to the real estate market is well provisioned. Policy measures were also introduced in 2023 to monitor and mitigate risks associated with the real estate market. - Policy response: Leverage the ongoing effort to step up surveillance of the property sector. Monitor risks to the banking sector closely and recognize NPLs promptly. Maintain strong banking sector capital buffers, liquidity and provisioning to mitigate the impact. Formalize financial safety net. Qatar has fiscal space to help contain threat to macroeconomic and financial stability. - Uncertainty surrounding the implementation of the Third National Development Strategy. - Likelihood: Medium; Expected impact if realized: Medium. - Description: Risks are two sided. On the upside, implementation could be faster, more efficient, and better coordinated than expected. On the downside, insufficient coordination and implementation capacity could lead to resource misallocation and slower progress. - Expected impact summary: Faster-than-expected implementation would boost medium-term growth more than envisaged. Slower-than-expected implementation would result in weaker-than-envisaged output gains. Resource misallocation would also entail larger fiscal costs. - Policy response: Properly sequence reforms and enhance inter-agency coordination to ensure appropriate resource allocation and smooth implementation. Regularly monitor and assess progress relative to benchmarks, reassess risks, and recalibrate implementation plans as needed, leveraging the newly established National Planning Council. ### RAM methodology note - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. - The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). - The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. *Annex V. Risk Assessment Matrix — Source: 1qatea2025001-print-pdf* ### Annex VI. Implementation of the 2023 Article IV Recommendations ### Fiscal Policy - Recommendation: The medium-term fiscal strategy should balance sustained fiscal prudence and transformation to a private sector-led economy. - Status: Broad fiscal prudence has been maintained and is expected to be upheld. The authorities plan to align spending with reform priorities in line with NDS3, including towards building climate resilience and human capital. - Recommendation: Accelerate revenue diversification, including via VAT introduction and CIT broadening. - Status: Recognizing the importance of mobilizing non-hydrocarbon revenues, the authorities preferred to introduce the VAT and other revenue diversification measures when domestic/global growth are more robust. Preparation for the implementation of the global minimum CIT is underway—its introduction is expected to be at the beginning of 2025. - Recommendation: Rationalize wage bill and continue subsidy reforms. - Status: Efforts are ongoing to introduce program-based budgeting, and the expenditure review program to enhance efficiency is underway. - Recommendation: Establish a well-designed medium-term fiscal framework and enhance transparency. - Status: Qatar’s updated medium-term budget covers a 5-year period for the first time to support NDS3 implementation. ### Monetary and Financial Sector Policy - Recommendation: Strengthen liquidity forecasting and management. - Status: The QCB has continued to improve liquidity management through T-bill issuance. A recent IMF technical assistance provided a series of recommendations which the QCB is considering. - Recommendation: Contain banks' exposure to foreign liabilities. - Status: A series of QCB measures have helped reduce banks’ short-term foreign asset-liability mismatches. A comprehensive Third Financial Sector Strategy was published, with plans to deepen domestic financial market which would help boost banks’ domestic funding. - Recommendation: Continue strengthening efforts to enhance banking sector resilience. - Status: Financial safety net (deposit insurance, recover/resolution framework) is being enhanced with IMF technical assistance. Measures to limit risks from the real estate sector have been introduced. - Recommendation: Carefully balance opportunities and risks around fintech and green financing initiatives with adequate regulations. - Status: A number of related areas are articulated in the Third Financial Sector Strategy. Fintech sandboxes provide a controlled environment. The digital asset framework establishes a legal and regulatory foundation. - Recommendation: Implement the FATF action plan in a decisive and coordinated manner. - Status: The authorities have submitted an action plan to implement FATF recommendations. A recent IMF diagnostic mission identified TA needs and initiated a 2-year work program to strengthen the effectiveness of the AML/CFT framework. ### Structural Reforms and Statistics - Recommendation: Focus further reforms on productivity, business environment, digitalization, and climate actions. - Status: Reforms are being intensified guided by the Third National Development Strategy (NDS3) released in January 2024, which provides an ambitious reform agenda to enhance human capital, productivity, business environment, and climate resilience. - Recommendation: Enhance macroeconomic statistics by improving data quality, coverage, and timeliness, and by strengthening the institutional framework for statistics. - Status: The National Planning Council (NPC) took over the former Planning and Statistics Authority (PSA) in May 2024. The National Statistics Center is established under NPC to strengthen statistics. Comprehensive data coverage on the external financial account and the International Investment Position remains a challenge, highlighted by Qatar's absence from surveys on CPIS and CDIS. *Annex VI. Implementation of the 2023 Article IV Recommendations — Source: 1qatea2025001-print-pdf* ### Annex VII. Data Issues ### Annex VII. Data Issues ### Overall assessment - Rationale: Data provision is broadly adequate for surveillance but with shortcomings. Data frequency, timeliness and coverage should be improved. - Overall statement: The data provided to the Fund is adequate for surveillance; the data provided to the Fund has some shortcomings but is broadly adequate for surveillance; the data provided to the Fund has some shortcomings that somewhat hamper surveillance; the data provided to the Fund has serious shortcomings that significantly hamper surveillance. (text presents the range of staff characterizations) ### National accounts - Findings: - Quarterly estimates of GDP at current and constant prices rely on limited data sources and need broadening to enhance accuracy. - GDP by expenditure needs to be more up to date—by component annual data lag the headline (in current prices) or are available only up to 2018 (in constant prices). - For constant-price GDP by expenditure, quarterly data should provide a breakdown (only the headline number is produced currently). - Timeliness issues: 2023Q4 GDP data were released in early-September 2024. 2024Q1–Q2 GDP data were released in early-December 2024 and 2024Q3 GDP data at end-December 2024. ### Prices - Findings: - Monthly Consumer and Producer Price Indices (CPI, PPI), and real estate price data are published timely. - CPI weights need to be updated more frequently. - The Ministry of Justice publishes a Weekly Newsletter with daily property transaction data by type which would benefit from greater consistency to better inform surveillance. ### Government finance - Findings: - Authorities are implementing the Government Financial Management Information System (GFMIS) enabling compilation of accrual fiscal accounts. - An IMF Technical Assistance (TA) mission in 2019 supported transition to the Government Finance Statistics Manual 2014. - Transparency improved via publication of annual budget documents and quarterly budget performance reports for the central government with headline budget and debt numbers; reports could include more line items and quarterly debt numbers. - Sovereign euro bond prospectus includes detailed revenue and expenditure line items and external bonds, but publication is infrequent. - For the 2023 budget, a press release was published and, instead of the regular budget statement, the Minister provided relevant information at the press conference. The format of the 2024 budget statement was similar to the 2023 budget press release. - Coverage of financial operations should be broadened to the general government including the Qatar Investment Authority (QIA). ### External sector - Findings: - Qatar Central Bank (QCB) reports quarterly balance of payments data timely, following the fifth edition of the balance of payments manual (BPM5). - Financial account has been developed and coverage improved for major public corporations, the Qatar Financial Center Authority, and the Qatar Stock Exchange; however, financial account data are aggregated. - FDI flow data deviate significantly from FDI commitment data—coordination to enhance coverage of FDI flow data is needed. - A 2017 TA mission helped develop a quarterly survey for nonfinancial sector data aimed at producing a quarterly International Investment Position (IIP) statement; capacity constraints persist and comprehensive IIP data have not been provided to the IMF. - More work needed to ensure comprehensive data coverage, collection, and granularity to allow participation in Coordinated Portfolio Investment Survey (CPIS) and Coordinated Direct Investment Survey (CDIS). ### Monetary and financial sectors - Findings: - QCB submits monetary and financial statistics (MFS) for the central bank and other depository corporations based on the Standardized Report Forms (SRFs). - MFS data are published in the International Financial Statistics on a timely basis. - Qatar reports some Financial Access Survey (FAS) series, including mobile money and the two U.N. Sustainable Development Goals indicators, but does not report data by gender. - QCB reports Financial Soundness Indicators as part of the National Summary Data Page, but does not submit them to the IMF; 4 indicators are missing relative to the IMF’s list of Core Financial Soundness indicators. ### Changes since the last Article IV consultation - Institutional and data developments: - The Planning and Statics Authority was replaced by a newly established National Planning Council to strengthen reform implementation under the Third National Development Strategy and to improve statistics. - The statistics authority is producing new supply and use tables to improve the consistency of GDP estimates. - A household survey is being finalized to update CPI weights. - The domestic “FDI ecosystem” has been fully mapped to identify additional input data sources including business registration platforms (QFC, QSTP, QFZA, Media city), expanding the survey frame from current 130+ entities to 2000+ entities. ### Corrective actions and capacity development priorities - Recommendations and priorities: - Enhance awareness across government entities of data gaps and international best practices. - Implement recommendations made by the referenced TAs. - Encourage authorities to seek Institute for Capacity Development (ICD) training, additional Statistics Departments (STA) TAs, and participate in the Special Data Dissemination Standard (SDDS) workshop organized by the Riyadh Regional Office. - Urge National Planning Council and National Statistics Center to coordinate across government entities on statistics, including consolidation of scattered data, submission to the IMF, and broader publication. ### Use of alternative data by staff - Issues and staff practice: - IIP data are unavailable, including QIA’s assets under management. - Staff estimate external debt data (for non-bank private sector and public sector debt outside of the central government), use alternative data sources for FDI, and rely on commercially available bank-level data as needed. ### Other data gaps - Key gaps identified: - A more granular forward-looking calendar of key data releases would aid surveillance and transparency. - By-maturity assets and liabilities data and by-sector non-performing loans (NPLs) data would enhance banking sector risk assessment. - Data on enterprises, particularly small and medium-sized enterprises (SMEs), and on climate change adaptation and mitigation would help inform surveillance. ### Data standards and dissemination - Participation and coverage: - Qatar participates in the Enhanced General Data Dissemination System (e-GDDS) and has published the data on its National Summary Data Page since July 2019. - Selected timetable and reporting status (as of January 6, 2025) — sample entries (frequency and timeliness as reported): - Exchange Rates: 5- Jan-25; Frequency: D; Expected Frequency: 1M - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Nov-24 (Date of Latest Observation); Dec-24 (Date Received); Frequency: M; Expected Timeliness: 1M - Reserve/Base Money: Nov-24; Dec-24; Frequency: M; Expected Timeliness: 2M; Qatar expected timeliness: 1M - Broad Money: Nov-24; Dec-24; Frequency: M; Expected Frequency: 1Q; Qatar expected timeliness: 1M - Central Bank Balance Sheet: Nov-24; Dec-24; Frequency: M; Expected Timeliness: 2M; Qatar expected timeliness: 1M - Consolidated Balance Sheet of the Banking System: Nov-24; Dec-24; Frequency: M; Expected Timeliness: 1Q; Qatar expected timeliness: 1M - Consumer Price Index: Oct-24; Dec-24; Frequency: M; Expected Timeliness: 2M; Qatar expected timeliness: 1M - Revenue, Expenditure, Balance and Composition of Financing—Central Government: June-24; July-24; Frequency: Q; Expected Frequency: 1Q; Expected Timeliness: 3M - Stocks of Central Government and Central Government-Guaranteed Debt: Dec-23; Nov-24; Frequency: A; Expected Frequency: Q; Expected Timeliness: 12M - External Current Account Balance: Jun-24; Nov-24; Frequency: Q; Expected Frequency: 1Q; Expected Timeliness: 1Q - Exports and Imports of Goods and Services: Jun-24; Sep-24; Frequency: Q; Expected Timeliness: 12W; Qatar expected timeliness: 1M - GDP/GNP: Sep-24; Dec-24; Frequency: Q; Expected Frequency: 1Q; Expected Timeliness: 3M - Gross External Debt: Dec-23; Nov-24; Frequency: Q; Expected Timeliness: 2Q; Expected Frequency: 12M - International Investment Position: not available (entries shown as "..."); Expected Frequency: 3Q ### Assessment heatmap and characteristics (as presented) - Median Rating row (as shown): BBBCBBB - Coverage row (as shown): BBBCB - Consistency row (as shown): BBCA - Frequency and Timeliness row (as shown): BABAA - Data Quality Characteristics — Granularity and Data Adequacy Assessment Rating: B (as presented) - Note: The detailed questionnaire results and scoring approach reference IMF Review of the Framework for Data Adequacy Assessment for Surveillance, January 2024, Appendix I. *Source: Annex VII. Data Issues, 1qatea2025001-print-pdf.* ### 2030. Since launching the National Vision in 2008, Qatar has made significant strides by leveraging energy sector ### Qatar: Progress toward National Vision 2030 ### Progress since 2008 - Since launching the National Vision in 2008, Qatar has leveraged energy sector revenues to build world-class infrastructure and institutions. - Qatar’s nonhydrocarbon economy has grown to account for about two-thirds of the total output, underscoring commitment to long-term economic diversification. ### NDS3 (National Development Strategy) and governance - The NDS3, launched in January 2024, aims to: - achieve sustainable economic growth; - establish a sustainable medium-term general budget framework with healthy levels of debt; - provide a high standard of living to Qataris; - position Qatar as a global destination. - The strategy emphasizes boosting human capital and innovation, enhancing the business environment, attracting FDI, and promoting exports. - The establishment of the National Planning Council will play a significant role in prioritizing reforms, ensuring inter-agency coordination, and monitoring progress. ### Sectoral strategies, FDI, and technology - The Qatar National Manufacturing Strategy for 2024-2030 aims to: - drive sustainable economic development; - diversify key economic sectors; - boost private sector participation and contributions; - advance manufacturing capabilities; - strengthen Qatar’s economic competitiveness in regional and global markets. - Qatar is targeting USD 100 billion in foreign direct investment by 2030. - The strategy seeks to establish Qatar as a leading innovation hub and preferred investment destination, regionally and globally. - Qatar is prioritizing the information technology sector and is well placed to leverage AI for productivity gain. - Qatar has a comparative advantage in energy cost and reliability to attract data centers. - The recent launch of the National Health Strategy 2024-2030 will further reinforce the goals of NDS3. ### Climate, environment, and biodiversity targets - The authorities are on track to meet their 2030 climate targets. - The Ministry of Environment and Climate Change launched its 2024 – 2030 Strategy to: - support environmental sustainability; - enhance Qatar’s ability to adapt to climate change; - protect the environment and conserve natural resources; - advance sustainable environmental practices while supporting research, innovation, and digital transformation; - strengthen environmental legislation and policies. - The strategy includes specific national targets: - 25% reduction in greenhouse gas emissions by 2030; - restoration of 30% of affected natural habitats; - protection of 30% of land and coastal areas; - conservation of 17 endangered and endemic species to preserve biodiversity. ### Data, monitoring, and implementation - Authorities recognize that reliable and timely economic data are essential for effective policymaking and reform implementation. - Efforts are underway to strengthen data quality and coverage to facilitate well-informed decision-making. - The National Planning Council is charged with prioritizing reforms, coordinating across agencies, and monitoring progress. ### Conclusion - Through prudent policies, sound fiscal and monetary management, and ambitious reforms, the State of Qatar has well-positioned itself to achieve its long-term economic National Vision 2030 and to further strengthen its prominent position within the global economy. *Source: 1qatea2025001-print-pdf - 2030. Since launching the National Vision in 2008, Qatar has made significant strides by leveraging energy sector* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1qatea2025001-print-pdf.pdf_