## _cr1041

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---

### Executive Summary — Background
- Qatar’s economy benefited from underlying strength derived from hydrocarbon revenues and timely government intervention in the banking system during the global crisis.
- Authorities’ stated actions and positions:
  - Committed to preserving financial stability through further intervention in the banking system, if needed.
  - The central bank has initiated a comprehensive review of its prudential regulations and monetary policy instruments.
  - Available fiscal space would be used prudently to limit potential aggregate demand pressures.
  - A high-level Ministerial Committee is monitoring the timing, issuance, duration and pricing of external debt.
  - Committed to establishing a single financial services regulator.
  - Consider the peg to the U.S. dollar in the period leading up to the Gulf Cooperation Council (GCC) Monetary Union as appropriate.
  - Indicated that Qatari banks’ exposures to Dubai World are not significant and are manageable without causing any serious impact on banks’ capital.
- Staff recommendations (summary):
  - Implement sound risk management practices to ensure banks do not rebuild excessively risky asset portfolios.
  - Ensure government interventions do not unduly exacerbate moral hazard or diminish incentives for improved bank risk management.
  - Rely on prudent use of fiscal space and macro-prudential instruments, in the context of the peg, to limit the risk of asset bubbles and inflation.
  - Manage potential overheating by careful prioritization of investment projects.
  - Monitor and manage external debt by establishing a formal debt entity.
  - Strengthen capacity to provide comprehensive international investment position (IIP) data.

### I. Current Economic Developments
- Growth and output:
  - Overall real GDP is expected to grow by 9 percent in 2009.
  - Hydrocarbon sector growth expected at 10 percent in 2009 (despite technical delays in LNG production).
  - Nonhydrocarbon sector growth expected at 8 percent in 2009, underpinned by investment.
- Price developments:
  - Consumer prices are projected to decline by 5½ percent in 2009.
  - Decline driven by a large decrease in domestic rents and falling international prices for food and raw materials; deflation results from positive supply shocks and slowing demand, though domestic activity supports non-tradable goods prices.
  - Measurement caveat: rents account for approximately 30 percent of the consumption basket and measurement is skewed toward new contracts.
- Money, credit, and deposits:
  - Broad money and credit growth decelerated sharply in 2009.
  - Credit expanded between end–2008 and October 2009 across industry, real estate and construction, and consumption.
  - Private sector deposits grew at an annualized rate of 30 percent between end–2008 and October 2009.
- Fiscal and external positions:
  - Development expenditures projected to increase by 14.7 percent in FY 2009/10.
  - Overall fiscal surplus projected at 11.8 percent of GDP in FY 2009/10.
  - External current account expected to record a surplus of 15.7 percent of GDP in 2009.
- Banking sector health:
  - Banking system is well capitalized and profitable.
  - Nonperforming loans (NPLs) at 2.0 percent at end-September 2009.
  - NPLs among the lowest in the GCC, reflecting prudent regulation and government support.

### II. Medium-Term Economic Outlook and Risks
- Growth outlook and composition:
  - Strategy: diversify by building related industries around the full LNG value-chain and linking upstream, midstream, and downstream components.
  - Nonhydrocarbon real GDP expected to record double-digit growth over the medium term.
  - Hydrocarbon output expected to grow 25 percent in 2010 and 13 percent in 2011–12 as LNG production peaks at 78 million tonnes by 2012.
  - Staff expects average annual inflation of 4 percent over the medium term, assuming planned infrastructure investments proceed.
  - By 2013, production of condensates will reach 750,000 barrels per day.
- Fiscal and external projections:
  - Annual average fiscal surplus estimated at around 12½ percent of GDP in 2010–14.
  - Government expenditures projected to average 29 percent of GDP in 2010–14, with capital spending of around 11 percent of GDP.
  - Current account surplus expected to stabilize at an annual average of 31 percent of GDP in 2010–14.
- Main risks:
  - Disruption in Qatar Petroleum’s LNG supply due to unexpected delays in construction of gas trains.
  - Large negative demand shock from a prolonged global recession.
  - Persistent low hydrocarbon prices.
  - Further large decline in real estate prices.
  - Staff scenario: a fall by 5 percentage points in nonhydrocarbon growth combined with an increase in interest rates of 300 basis points, maintained over three years, could increase NPLs to high levels observed earlier in the decade.
  - Loans to contractors and real estate constituted 22 percent of total domestic credit of banks at end-October 2009; building and construction sector contributes to 15 percent of real non-hydrocarbon growth.
  - Additional adverse regional developments, particularly in Dubai, could negatively affect global investor sentiment toward GCC countries.

### III. Policy Discussions — Financial Sector Stability
- Scale and components of official intervention in 2009:
  - Official intervention reached about 6½ percent of GDP.
  - Actions included:
    - Capital injections in banks by the Qatar Investment Authority (QIA) at 5 percent of their enhanced share capital (around $1 billion). A second round of capital injections of 5 percent is scheduled before end-December 2009.
    - Purchase of banks’ equity investment portfolios (up to $2 billion) by the government; investment portfolios purchased at marked-to-market values held by banks.
    - Purchase of banks’ real estate portfolios (up to $4 billion) by the government; real estate portfolios purchased at book values net of provisions.
- Objectives of intervention:
  - Provide liquidity, restore confidence, signal government commitment to support the banking system.
  - Contain financial risks and maintain local banking system stability.
- Effects and risks of intervention:
  - Combined capital adequacy ratio (CAR) for the eight major listed banks improved from 16½ percent to 18½ percent after intervention.
  - Staff stress tests confirmed interventions strengthened banks’ ability to withstand future credit and market shocks.
  - Authorities announced an exit plan for asset purchases; management of purchased portfolios vested with the Governor of the Central Bank, assisted by a committee.
  - Banks can repurchase investments within 5 years at the same sale price; real estate loans can be repurchased at original sale price after 3 years — this option creates an implicit subsidy from the government.
  - Staff estimates the implicit subsidy value:
    - For the investment portfolio: between $0.4 billion and $0.8 billion.
    - For the real estate portfolio: between $0.6 billion and $1.1 billion.
  - Risks to the exit plan arise from potential contingent losses to the government if valuations fall further, though such losses do not appear likely.
  - No immediate plans to unwind QIA’s equity holdings in banks.
- Prudential and supervisory measures:
  - Post-intervention, QCB has restricted banks from taking on new exposures in equity and real estate (supported by staff).
  - Off-balance sheet risks appear contained, mostly in collateralized credit lines.
  - Authorities indicate exposures of Qatari banks to Dubai World are insignificant and manageable.
  - Staff recommended updating and testing resolution frameworks for financial institutions and cross-border/cross-supervisory frameworks.
  - Need to review insolvency/arbitration frameworks and enforceability of contracts and foreign judgments in local courts as Qatar embarks on higher external borrowing.

### Box 1. Banking Sector Stress Test — Assumptions and Scenarios
- Assumptions:
  - Assets of the eight Qatari listed banks disaggregated into: (i) risky loans (loans to private sector, including one-half of consumer loans); (ii) risky market portfolios (all portfolio investments in the available-for-sale category); and (iii) all other assets (loans to the government, and one-half of consumer loans), not shocked.
  - Risky loans assumed to suffer from NPLs rising from 1 percentage point to 20 percentage points above the baseline; Loss Given Default ratio = 0.75.
  - Value of risky portfolio assets shocked with losses up to 50 percent.
- Scenarios:
  - Eight scenarios combine increasingly high NPLs and increasingly large market valuation losses.
  - Different NPL calibrations can be matched with macroeconomic shocks using the NPL model presented in Box 2.

### Box 1 — Results Before Authorities’ Intervention (banks’ balance sheets at end-December 2008)
- Summary findings:
  - Three banks would have suffered losses pulling their respective CARs below the regulatory requirement of 10 percent as soon as NPLs reached 10 percent.
  - Five banks out of 8 would have needed recapitalization in the worst case scenario.
  - Recapitalization needs for the overall banking system would have ranged between $0.2 billion and $2.5 billion.
- Stress test table (preserve original layout and figures):
  - Initial CAR= 16.5  5 percent10 percent15 percent20 percent
  - Market down by 25 percent
    - New banking system CAR14.112.711.29.7
    - Number of banks below regulatory CAR1334
    - Recapitalization needs (in billions of U.S. dollars)0.00.20.91.7
  - Market down by 50 percent
    - New banking system CAR12.911.510.08.5
    - Number of banks below regulatory CAR3345
    - Recapitalization needs (in billions of U.S. dollars)0.20.81.52.5

### Box 1 — Authorities’ Intervention and Effects (through September 2009)
- The total intervention of the authorities, including capital injections and purchases of assets up to September 2009, amounted to about $6.5 billion.
- Effects observed:
  - Increased liquidity.
  - Decreased risk-weighted assets.
  - Greater capital cushion against credit and market risks.
- Impact on stress-test outcomes:
  - A 10 percent increase in NPLs would now pull only one bank below the regulatory CAR.
  - Recapitalization needs remain below $1 billion in the worst scenario, in which 3 banks would need additional capital.

### Box 1 — Results After Authorities’ Intervention
- Stress test table (preserve original layout and figures):
  - Capital Adequacy Ratio of the Banking System After Intervention
  - NPLs
  - Initial CAR= 18.55 percent10 percent15 percent20 percent
  - Market down by 25 percent
    - New banking system CAR16.515.213.812.4
    - Number of banks below regulatory CAR0123
    - Recapitalization needs (in billions of U.S. dollars)0.00.10.20.6
  - Market down by 50 percent
    - New banking system CAR14.814.413.011.6
    - Number of banks below regulatory CAR1223
    - Recapitalization needs (in billions of U.S. dollars)0.00.10.30.9
- Key quantitative assumptions reiterated:
  - NPLs rising from 1 percentage point to 20 percentage points above the baseline.
  - Loss Given Default ratio = 0.75.
  - Value of risky portfolio assets shocked with losses up to 50 percent.

### Monetary Union, Structural Reforms, and Data
- Monetary union and preparations:
  - Qatar has signed the monetary agreement and remains committed to participating in the GCC monetary union.
  - Authorities believe it will be difficult to establish the GCC Monetary Union in 2010.
  - Main tasks ahead: develop an appropriate monetary policy framework; establish a common system of payments and settlements; establish mechanisms for cross-border payments and liquidity transfers in the common currency.
  - Fiscal-side priorities: set up a common accounting framework and establish adequate budgetary procedures.
- Other structural reforms and fiscal measures:
  - Corporate tax rate for foreign companies operating in the non hydrocarbon sectors lowered from 35 percent to 10 percent with effect from January 1, 2010.
  - Authorities continue to follow developments towards the introduction of a GCC-wide value-added tax (VAT).
  - Pension reform: high-level committee reviewing the social insurance law after a study projecting an actuarial deficit in pensions by 2041.
  - Energy subsidies: staff commended progressive phasing out of energy subsidies in the manufacturing sector.
- Financial markets and debt management:
  - Recommendation to develop a domestic sovereign benchmark yield curve to facilitate long-term borrowing by banks in domestic currency, improve pricing efficiency, and diversify financial risks.
  - Authorities could consider establishing a debt management entity to develop a debt strategy.
- Data compilation and transparency:
  - Intensify efforts to improve quality of macroeconomic statistics; staff underscored need to start publishing official real GDP data as soon as possible.
  - Priorities: enhance timeliness and availability of public sector operations data; improve coordination across agencies.
  - Staff welcomed progress on provision of elements of the IIP data and encouraged compilation and provision of comprehensive IIP data to the Fund.
  - Authorities signaled interest in Technical Assistance to improve the balance of payments financial account.
  - Staff’s estimate: Qatar’s net IIP, excluding unknown foreign financial claims and liabilities of the private sector is of the order of $70 billion.

### Staff appraisal — macroeconomic and financial sector assessment
- Impact of global crisis:
  - Impact on Qatar limited due to underlying strength, supportive macroeconomic and macro-prudential policies, and timely intervention in the banking system.
  - Impact of the recent events in Dubai on Qatar’s banking system appears limited at this point.
- Growth outlook:
  - Qatar continues to be the fastest growing economy in the GCC.
  - Near-term growth expected to be driven by strong expansion in LNG production (and related industries) and by investments aimed at economic diversification.
- Risks and policy priorities:
  - Monitor potential risks from overheating through careful sequencing and prioritization of investments.
  - Closely monitor and manage possible impact of future increases in interest rates on external debt.
  - Prudent use of available fiscal space should be part of strategy to contain aggregate demand.
- Financial sector interventions:
  - Staff supports authorities’ timely intervention; government intervention improved liquidity, provided room for lending, and increased system resilience.
  - Important to prevent banks from rebuilding excessively risky asset portfolios; ensure interventions do not unduly exacerbate moral hazard.
  - QCB should continue to build up capacity in supervision and risk management.
- Supervision and resolution:
  - Continue regular stress tests of commercial banks.
  - Establish a prompt corrective action framework to avoid regulatory forbearance.
  - Periodically update resolution frameworks for financial institutions and cross-border and cross-supervisory frameworks.
- Monetary-fiscal policy mix:
  - Adequate monetary-fiscal policy mix is critical for macroeconomic stability and could be combined with macro-prudential tools to manage credit growth.
  - With limited policy flexibility under the peg to the U.S. dollar and ongoing infrastructure investment needs, macro-prudential instruments will remain the main tool for limiting the risk of asset bubbles.
- Financial sector regulation:
  - Authorities’ intention to establish a unified regulator of financial services in the near future is welcomed; effective monitoring needed to close regulatory gaps during the transition.
- Specific recommendations reiterated:
  - Establish a debt management entity and press ahead with plans to develop a domestic sovereign benchmark yield curve.
- Exchange rate policy:
  - Staff supports maintaining the peg to the U.S. dollar until the establishment of the GCC monetary union.
  - Staff’s assessment shows that the real effective exchange rate is broadly in line with fundamentals.

### Selected Key Statistics and Projections (extracted)
- Real GDP growth (percent per annum): 2005 9.2; 2006 15.0; 2007 13.7; 2008 15.8; 2009 9.0; 2010 18.5.
- Hydrocarbon real growth (percent): 2005 6.0; 2006 10.7; 2007 12.9; 2008 17.1; 2009 10.0; 2010 25.2.
- Nonhydrocarbon real growth (percent): 2005 13.1; 2006 19.9; 2007 14.5; 2008 14.5; 2009 8.0; 2010 11.5.
- CPI period average: 2005 8.8; 2006 11.8; 2007 13.8; 2008 15.0; 2009 -5.5; 2010 1.0.
- Nominal GDP (in million U.S. dollars): 2005 42,463; 2006 56,918; 2007 71,041; 2008 100,407; 2009 82,857; 2010 108,941.
- LNG production (in million tons per year): 2005 21.2; 2006 24.7; 2007 25.2; 2008 31.5; 2009 39.0; 2010 58.1.
- Overall fiscal balance (percent of GDP, fiscal year): 2005 8.9; 2006 8.6; 2007 11.6; 2008 12.0; 2009 -1.8; 2010 11.8.
- Development (capital) expenditure projected increase: 14.7 percent in FY 2009/10.
- Current account (percent of GDP): 2005 33.2; 2006 28.3; 2007 30.7; 2008 33.0; 2009 15.7; 2010 22.7.
- Central bank reserves, gross (million U.S. dollars): 2005 4,572; 2006 5,416; 2007 9,753; 2008 9,837; 2009 19,244; 2010 20,847.
- Total external debt (excluding banks, million U.S. dollars): 2005 14,989; 2006 19,486; 2007 24,771; 2008 35,430; 2009 50,863; 2010 67,424.
- Banking sector NPLs: 2.0 percent at end-September 2009.
- Official intervention total (through September 2009): about $6.5 billion.
- Combined CAR for eight major listed banks: improved from 16½ percent to 18½ percent after intervention.
- Staff estimate of Qatar’s net IIP (excluding unknown private-sector foreign financial claims and liabilities): of the order of $70 billion.

*Source: Executive Summary, Box 1, staff appraisal, and data tables (IMF staff report).*

### Executive Summary ......................................................................................................

### Executive Summary

### Background
- Qatar’s economy benefited from underlying strength derived from hydrocarbon revenues and timely government intervention in the banking system during the global crisis.
- Authorities’ stated actions and positions:
  - Committed to preserving financial stability through further intervention in the banking system, if needed.
  - The central bank has initiated a comprehensive review of its prudential regulations and monetary policy instruments.
  - Available fiscal space would be used prudently to limit potential aggregate demand pressures.
  - A high-level Ministerial Committee is monitoring the timing, issuance, duration and pricing of external debt.
  - Committed to establishing a single financial services regulator.
  - Consider the peg to the U.S. dollar in the period leading up to the Gulf Cooperation Council (GCC) Monetary Union as appropriate.
  - Indicated that Qatari banks’ exposures to Dubai World are not significant and are manageable without causing any serious impact on banks’ capital.
- Staff recommendations (summary):
  - Implement sound risk management practices to ensure banks do not rebuild excessively risky asset portfolios.
  - Ensure government interventions do not unduly exacerbate moral hazard or diminish incentives for improved bank risk management.
  - Rely on prudent use of fiscal space and macro-prudential instruments, in the context of the peg, to limit the risk of asset bubbles and inflation.
  - Manage potential overheating by careful prioritization of investment projects.
  - Monitor and manage external debt by establishing a formal debt entity.
  - Strengthen capacity to provide comprehensive international investment position (IIP) data.

### I. Current Economic Developments
- Growth and output:
  - Overall real GDP is expected to grow by 9 percent in 2009.
  - Hydrocarbon sector growth expected at 10 percent in 2009 (despite technical delays in LNG production).
  - Nonhydrocarbon sector growth expected at 8 percent in 2009, underpinned by investment.
- Price developments:
  - Consumer prices are projected to decline by 5½ percent in 2009 (sharpest deflation among the GCC countries).
  - Decline driven by a large decrease in domestic rents and falling international prices for food and raw materials; deflation results from positive supply shocks and slowing demand, though domestic activity supports non-tradable goods prices.
  - Measurement caveat: rents account for approximately 30 percent of the consumption basket and measurement is skewed toward new contracts.
- Money, credit, and deposits:
  - Broad money and credit growth decelerated sharply in 2009.
  - Credit expanded between end–2008 and October 2009 across industry, real estate and construction, and consumption.
  - Private sector deposits grew at an annualized rate of 30 percent between end–2008 and October 2009.
- Fiscal and external positions:
  - Development expenditures projected to increase by 14.7 percent in FY 2009/10.
  - Overall fiscal surplus projected at 11.8 percent of GDP in FY 2009/10 (mainly reflecting transfer of high investment income earned by public enterprises in 2008).
  - External current account expected to record a surplus of 15.7 percent of GDP in 2009.
- Banking sector health:
  - Banking system is well capitalized and profitable.
  - Nonperforming loans (NPLs) at 2.0 percent at end-September 2009.
  - NPLs among the lowest in the GCC, reflecting prudent regulation and government support.

### II. Medium-Term Economic Outlook and Risks
- Growth outlook and composition:
  - Strategy: diversify by building related industries around the full LNG value-chain and linking upstream, midstream, and downstream components.
  - Nonhydrocarbon real GDP expected to record double-digit growth over the medium term.
  - Hydrocarbon output expected to grow 25 percent in 2010 and 13 percent in 2011–12 as LNG production peaks at 78 million tonnes by 2012.
  - Staff expects average annual inflation of 4 percent over the medium term, assuming planned infrastructure investments proceed.
  - Qatar’s production of gas-related products and condensates will grow; by 2013, production of condensates will reach 750,000 barrels per day.
- Fiscal and external projections:
  - Annual average fiscal surplus estimated at around 12½ percent of GDP in 2010–14.
  - Government expenditures projected to average 29 percent of GDP in 2010–14, with capital spending of around 11 percent of GDP.
  - Nonhydrocarbon fiscal balance (percent of nonhydrocarbon GDP) will decline over the medium term, mainly due to continued large transfers of investment income to the budget from public enterprises.
  - Current account surplus expected to stabilize at an annual average of 31 percent of GDP in 2010–14.
- Main risks:
  - Disruption in Qatar Petroleum’s LNG supply due to unexpected delays in construction of gas trains.
  - Large negative demand shock from a prolonged global recession.
  - Persistent low hydrocarbon prices.
  - Further large decline in real estate prices.
  - Staff analysis: a fall by 5 percentage points in nonhydrocarbon growth combined with an increase in interest rates of 300 basis points, maintained over three years, could increase NPLs to high levels observed earlier in the decade.
  - Loans to contractors and real estate constituted 22 percent of total domestic credit of banks at end-October 2009; building and construction sector contributes to 15 percent of real non-hydrocarbon growth.
  - Additional adverse regional developments, particularly in Dubai, could negatively affect global investor sentiment toward GCC countries.

### III. Policy Discussions — Financial Sector Stability
- Scale and components of official intervention in 2009:
  - Official intervention reached about 6½ percent of GDP.
  - Actions included:
    - Capital injections in banks by the Qatar Investment Authority (QIA) at 5 percent of their enhanced share capital (around $1 billion). A second round of capital injections of 5 percent is scheduled before end-December 2009.
    - Purchase of banks’ equity investment portfolios (up to $2 billion) by the government; investment portfolios purchased at marked-to-market values held by banks.
    - Purchase of banks’ real estate portfolios (up to $4 billion) by the government; real estate portfolios purchased at book values net of provisions.
- Objectives of intervention:
  - Provide liquidity, restore confidence, signal government commitment to support the banking system.
  - Contain financial risks and maintain local banking system stability.
- Effects and risks of intervention:
  - Combined capital adequacy ratio (CAR) for the eight major listed banks improved from 16½ percent to 18½ percent after intervention.
  - Staff stress tests confirmed interventions strengthened banks’ ability to withstand future credit and market shocks.
  - Authorities announced an exit plan for asset purchases; management of purchased portfolios vested with the Governor of the Central Bank, assisted by a committee.
  - Banks can repurchase investments within 5 years at the same sale price; real estate loans can be repurchased at original sale price after 3 years — this option creates an implicit subsidy from the government.
  - Staff estimates the implicit subsidy value:
    - For the investment portfolio: between $0.4 billion and $0.8 billion.
    - For the real estate portfolio: between $0.6 billion and $1.1 billion (depending on assumptions of historical volatility and discount rate).
  - Risks to the exit plan arise from potential contingent losses to the government if valuations fall further, though such losses do not appear likely.
  - No immediate plans to unwind QIA’s equity holdings in banks.
- Prudential and supervisory measures:
  - Post-intervention, QCB has restricted banks from taking on new exposures in equity and real estate (supported by staff).
  - Off-balance sheet risks appear contained, mostly in collateralized credit lines.
  - Authorities indicate exposures of Qatari banks to Dubai World are insignificant and manageable; available information shows limited direct exposures across named banks.
  - Staff recommended updating and testing resolution frameworks for financial institutions and cross-border/cross-supervisory frameworks.
  - Recent regional developments underscore need to review insolvency/arbitration frameworks and enforceability of contracts and foreign judgments in local courts as Qatar embarks on higher external borrowing.

*Source: Executive Summary (IMF staff report).*

### Box 1. Banking Sector Stress Test

### Box 1. Banking Sector Stress Test

### Assumptions
- The assets of the eight Qatari listed banks are disaggregated into three components: (i) risky loans (comprising loans to the private sector, including one-half of consumer loans); (ii) risky market portfolios (comprising all portfolio investments in the available-for-sale category); and (iii) all other assets (loans to the government, and one-half of consumer loans), which are not shocked in the stress test.
- Risky loans are assumed to suffer from NPLs, rising from 1 percentage point to 20 percentage points above the baseline (with a Loss Given Default ratio at 0.75), and the value of risky portfolio assets is shocked with losses up to 50 percent.

### Scenarios
- Eight scenarios combine increasingly high NPLs and increasingly large market valuation losses.
- Different NPL calibrations can be matched with macroeconomic shocks using the NPL model presented in Box 2.

### Results — Before Authorities’ Intervention (based on banks’ balance sheets at end-December 2008)
- Summary findings:
  - Three banks would have suffered losses pulling their respective CARs below the regulatory requirement of 10 percent as soon as NPLs reached 10 percent.
  - Five banks out of 8 would have needed recapitalization in the worst case scenario.
  - Recapitalization needs for the overall banking system would have ranged between $0.2 billion and $2.5 billion.
- Stress test table (preserve original layout and figures):
  - Initial CAR= 16.5  5 percent10 percent15 percent20 percent
  - Market down by 25 percent
    - New banking system CAR14.112.711.29.7
    - Number of banks below regulatory CAR1334
    - Recapitalization needs (in billions of U.S. dollars)0.00.20.91.7
  - Market down by 50 percent
    - New banking system CAR12.911.510.08.5
    - Number of banks below regulatory CAR3345
    - Recapitalization needs (in billions of U.S. dollars)0.20.81.52.5

### Authorities’ Intervention and Effects (through September 2009)
- The total intervention of the authorities, including capital injections and purchases of assets up to September 2009, amounted to about $6.5 billion.
- Effects observed:
  - Increased liquidity.
  - Decreased risk-weighted assets.
  - Greater capital cushion against credit and market risks.
- Impact on stress-test outcomes:
  - A 10 percent increase in NPLs would now pull only one bank below the regulatory CAR.
  - Recapitalization needs remain below $1 billion in the worst scenario, in which 3 banks would need additional capital.

### Results — After Authorities’ Intervention
- Stress test table (preserve original layout and figures):
  - Capital Adequacy Ratio of the Banking System After Intervention
  - NPLs
  - Initial CAR= 18.55 percent10 percent15 percent20 percent
  - Market down by 25 percent
    - New banking system CAR16.515.213.812.4
    - Number of banks below regulatory CAR0123
    - Recapitalization needs (in billions of U.S. dollars)0.00.10.20.6
  - Market down by 50 percent
    - New banking system CAR14.814.413.011.6
    - Number of banks below regulatory CAR1223
    - Recapitalization needs (in billions of U.S. dollars)0.00.10.30.9

### Key quantitative assumptions and calibrations (from footnote)
- NPLs rising from 1 percentage point to 20 percentage points above the baseline.
- Loss Given Default ratio = 0.75.
- Value of risky portfolio assets shocked with losses up to 50 percent.

*Source: Box 1. Banking Sector Stress Test.*

### 17.      Qatar remains committed to participating in the GCC monetary union and has

### _cr1041 - 17.      Qatar remains committed to participating in the GCC monetary union and has

### Monetary union and preparations
- Qatar has signed the monetary agreement and remains committed to participating in the GCC monetary union.
- Authorities believe it will be difficult to establish the GCC Monetary Union in 2010, in light of the preparations needed to adopt a common currency by year-end.
- Main tasks ahead:
  - Develop an appropriate monetary policy framework.
  - Establish a common system of payments and settlements.
  - Establish mechanisms for cross-border payments and liquidity transfers in the common currency.
- Fiscal-side priorities:
  - Set up a common accounting framework.
  - Establish adequate budgetary procedures.

### Other structural reforms and fiscal measures
- Tax law amendment:
  - Corporate tax rate for foreign companies operating in the non hydrocarbon sectors lowered from 35 percent to 10 percent with effect from January 1, 2010.
- Authorities continue to follow developments towards the introduction of a GCC-wide value-added tax (VAT).
- Pension reform:
  - Following recommendations of a study projecting an actuarial deficit in pensions by 2041, a high-level committee is reviewing the social insurance law to strengthen long-term sustainability.
- Energy subsidies:
  - Staff commended the authorities’ policy of progressively phasing out energy subsidies in the manufacturing sector.
  - Rationale: pricing of inputs at market prices should provide incentives to focus on most profitable areas while maximizing energy sales receipts for Qatar Petroleum.

### Financial markets and debt management
- Recommendation to develop a domestic sovereign benchmark yield curve to:
  - Facilitate long-term borrowing by banks in domestic currency.
  - Improve efficiency in the pricing of financial products.
  - Diversify overall financial risks.
- Authorities could consider establishing a debt management entity to develop a debt strategy in the context of overall economic policy.

### Data compilation and transparency
- Given increasing integration with the global economy and the proposed GCC Monetary Union, intensify efforts to improve quality of macroeconomic statistics.
- Staff underscored need to start publishing official real GDP data as soon as possible.
- Priorities:
  - Enhance timeliness and availability of data on public sector operations.
  - Improve coordination across agencies.
- International Investment Position (IIP) data:
  - Staff welcomed progress on provision of elements of the IIP data and encouraged compilation and provision of comprehensive IIP data to the Fund.
  - Authorities signaled interest in Technical Assistance (TA) to improve the balance of payments financial account, which will form the basis for providing comprehensive IIP data to the Fund.
- Staff’s estimate: Qatar’s net IIP, excluding unknown foreign financial claims and liabilities of the private sector is of the order of $70 billion. (footnote 16)

### Staff appraisal — macroeconomic and financial sector assessment
- Impact of global crisis:
  - Impact on Qatar has been limited, owing to underlying strength of the economy, supportive macroeconomic and macro-prudential policies, and timely and decisive intervention in the banking system.
  - Impact of the recent events in Dubai on Qatar’s banking system appears to be limited at this point.
- Growth outlook:
  - Qatar continues to be the fastest growing economy in the GCC.
  - Near-term growth expected to be driven by strong expansion in LNG production (and related industries) and by investments aimed at economic diversification.
- Risks and policy priorities:
  - Monitor potential risks from overheating through careful sequencing and prioritization of investments.
  - Closely monitor and manage possible impact of future increases in interest rates on external debt.
  - Prudent use of available fiscal space should be part of strategy to contain aggregate demand.
- Financial sector interventions:
  - Staff supports authorities’ timely intervention in the financial sector; government intervention improved liquidity, provided room for lending, and increased system resilience.
  - Important to prevent banks from rebuilding excessively risky asset portfolios; ensure interventions do not unduly exacerbate moral hazard or diminish incentives for improved risk management.
  - QCB should continue to build up capacity in supervision and risk management.
- Supervision and resolution:
  - Continue regular stress tests of commercial banks to evaluate potential weaknesses and ensure timely responses.
  - Establish a prompt corrective action framework to avoid regulatory forbearance.
  - Periodically update resolution frameworks for financial institutions and cross-border and cross-supervisory frameworks.
- Monetary-fiscal policy mix:
  - Adequate monetary-fiscal policy mix is critical for macroeconomic stability and could be combined with macro-prudential tools to manage credit growth.
  - With limited policy flexibility under the peg to the U.S. dollar and ongoing infrastructure investment needs, macro-prudential instruments will remain the main tool for limiting the risk of asset bubbles.
- Financial sector regulation:
  - Authorities’ intention to establish a unified regulator of financial services in the near future is welcomed.
  - Effective monitoring is needed to close regulatory gaps during the transition and establish procedures to address issues arising from increased market competition.
- Specific recommendations reiterated:
  - Establish a debt management entity and press ahead with plans to develop a domestic sovereign benchmark yield curve to facilitate long-term borrowing and improve pricing efficiency.
- Exchange rate policy:
  - Staff supports the authorities’ decision to maintain the peg to the U.S. dollar until the establishment of the GCC monetary union.
  - Staff’s assessment shows that the real effective exchange rate is broadly in line with fundamentals.

*IMF staff appraisal and recommendations as presented in source content.*

### 30.       It is recommended that Qatar remain on the standard 12-month Article IV

### It is recommended that Qatar remain on the standard 12-month Article IV consultation cycle.

### National income, production, and prices
- Nominal GDP (in million Qatari riyals): 154,565; 207,183; 258,590; 365,482; 301,599; 396,545 (Est., Proj., Proj. for 2005–2010 as shown).
- Nominal hydrocarbon GDP (in million Qatari riyals): 92,071; 118,707; 146,143; 222,127; 150,490; 227,951.
- Nominal GDP (in million U.S. dollars): 42,463; 56,918; 71,041; 100,407; 82,857; 108,941.
- Nominal GDP per capita (in U.S. dollars): 53,333; 67,922; 76,374; 91,478; 68,008; 80,556.
- Nominal GDP growth (in percent per annum): 33.8; 34.0; 24.8; 41.3; -17.5; 31.5.
- Real GDP growth (in percent per annum): 9.2; 15.0; 13.7; 15.8; 9.0; 18.5.
- Hydrocarbon real growth: 6.0; 10.7; 12.9; 17.1; 10.0; 25.2.
- Nonhydrocarbon real growth: 13.1; 19.9; 14.5; 14.5; 8.0; 11.5.
- Crude oil output (in thousand barrels per day): 760; 803; 839; 855; 800; 824.
- LNG production (in million tons per year): 21.2; 24.7; 25.2; 31.5; 39.0; 58.1.
- Oil export price (in U.S. dollars per barrel): 51.69; 62.93; 70.02; 95.52; 60.57; 75.31.
- CPI period average: 8.8; 11.8; 13.8; 15.0; -5.5; 1.0.

### Public finance (central government / fiscal year basis)
- Total revenue (percent of GDP or fiscal-year numbers shown across tables):
  - Fiscal-year series (In million Qatari riyals): 65,685; 86,062; 117,790; 140,947; 88,694; 149,885 (Est./Budget/Proj. 2005/06–2009/10).
  - Percent of GDP series: 39.2; 39.1; 41.3; 40.3; 27.3; 46.1.
- Hydrocarbon revenue:
  - In million Qatari riyals: 46,381; 55,429; 70,748; 80,009; 42,235; 63,412.
  - Percent of GDP series: 27.7; 25.2; 24.8; 22.9; 13.0; 19.5.
- Other revenue (million Qatari riyals): 19,304; 30,634; 47,042; 60,938; 46,459; 86,473.
- Investment income from public enterprises (million Qatari riyals): 14,234; 20,702; 30,343; 33,271; 25,820; 53,740.
- Total expenditure (million Qatari riyals): 50,768; 67,147; 84,728; 98,855; 94,499; 111,486.
- Current expenditure (million Qatari riyals): 32,755; 49,751; 50,923; 65,721; 56,573; 73,486.
- Development (capital) expenditure (million Qatari riyals): 18,013; 17,396; 33,805; 33,134; 37,926; 38,000.
- Overall balance (million Qatari riyals): 14,917; 18,915; 33,062; 42,092; -5,805; 38,399.
- Overall balance (percent of GDP series): 8.9; 8.6; 11.6; 12.0; -1.8; 11.8.
- Nonhydrocarbon fiscal balance (percent of GDP): -18.8; -16.6; -13.2; -10.8; -18.9; -7.7.
- Nonhydrocarbon fiscal balance (in percent of nonhydrocarbon GDP): -45.6; -38.7; -31.4; -26.1; ...; -16.1.

### Money and credit / Depository corporations (selected)
- Broad money (annual percent change): 44.6; 38.0; 39.5; 19.7; 16.4; 11.6 (2005–2010 series).
- Net foreign assets (annual percent change): 50.3; 28.1; 0.3; -20.5; -8.3; 51.4.
- Net domestic assets (annual percent change): 36.8; 52.8; 88.6; 47.0; 24.8; 1.0.
- Domestic credit (annual percent change): 60.0; 45.7; 66.1; 48.7; -0.5; 14.7.
- Claims on public enterprises (annual percent change): 34.9; 44.0; 19.8; 177.1; -28.0; 31.5.
- Claims on private sector (annual percent change): 63.5; 45.9; 51.3; 42.4; 7.0; 11.6.
- Depository corporations survey (levels, in million Qatari riyals): Net foreign assets: 47,820; 61,250; 61,444; 48,869; 44,827; 67,864. Broad money: 79,847; 110,173; 153,735; 184,005; 214,156; 238,935.

### External sector and balance of payments (2005–10 projections / levels in million U.S. dollars)
- Trade balance: 17,058; 20,272; 24,413; 39,272; 21,625; 35,419.
- Exports: 26,122; 35,083; 44,237; 64,407; 45,355; 67,131.
  - Crude oil and refined petroleum products: 14,122; 17,840; 21,178; 28,092; 17,202; 25,182.
  - LNG and related exports: 8,738; 13,360; 18,710; 30,808; 23,615; 35,503.
  - Other exports: 3,261; 3,883; 4,349; 5,507; 4,538; 6,445.
- Imports: -9,064; -14,811; -19,824; -25,135; -23,729; -31,712.
- Current account (in million U.S. dollars): 14,100; 16,113; 21,823; 33,138; 12,997; 24,726.
- Current account (in percent of GDP): 33.2; 28.3; 30.7; 33.0; 15.7; 22.7.
- Central bank reserves, gross (million U.S. dollars): 4,572; 5,416; 9,753; 9,837; 19,244; 20,847.
  - In months of imports of goods and services (next 12 months): 2.5; 2.4; 3.4; 3.4; 5.1; 4.9.
- Total external debt (excluding banks, million U.S. dollars): 14,989; 19,486; 24,771; 35,430; 50,863; 67,424.
  - In percent of GDP: 35.3; 34.2; 34.9; 35.3; 61.4; 61.9.
- Government external debt (million U.S. dollars): 3,743; 3,333; 2,871; 6,126; 13,734; 15,737.
  - In percent of GDP: 8.8; 5.9; 4.0; 6.1; 16.6; 14.4.
- Debt service (excluding banks, in percent of GDP): 4.9; 4.7; 7.6; 5.1; 11.0; 4.9.

### Balance of Payments (components and flows)
- Current account components (in million U.S. dollars): Trade balance 17,058; Services (net) -924; Income (net) 542; Transfers (net) -2,576; Current account 14,100 (2005 shown; series continues as in Table 4).
- Financial account (net): -6,582; -9,563; -16,448; -25,799; -2,069; -22,012 (2005–2010 series).
- Direct investment, net: 2,500; 3,500; 4,700; 4,107; 8,722; 6,334.
- Overall balance (in million U.S. dollars): 1,196; 855; 4,136; 286; 9,406; 1,019.

### Vulnerability and solvency indicators
- Total debt (in billion U.S. dollars, including commercial banks): 11.4; 12.7; 17.8; 26.3; 41.9; 59.1 (2003–2008 series).
- Total debt (in percent of GDP): 48.4; 40.0; 42.0; 46.2; 58.9; 58.8.
- Debt service/exports of goods and services: 28.3; 14.0; 11.5; 14.8; 19.5; 28.2.
- Government gross domestic debt/GDP: 22.3; 14.8; 10.2; 7.4; 5.2; 8.7.
- Government net domestic debt/GDP (net of government deposits with resident banks): 32.9; 20.6; 14.0; 9.2; 5.1; 11.2.
- Government external debt/GDP (fiscal year basis): 15.9; 10.9; 7.6; 5.0; 3.3; 7.4.
- Central bank net reserves (million U.S. dollars): 2,873; 3,358; 4,555; 5,410; 9,546; 9,832.
  - In months of imports: 4.1; 3.2; 2.5; 2.4; 3.3; 3.4.
- Credit growth and banking indicators: Net domestic credit (percent change) 5.3; 18.5; 40.5; 33.7; 59.2; 47.4. Private sector credit (percent change) 27.3; 30.4; 63.5; 45.9; 51.3; 42.4.

### Medium-term baseline scenario (2006–14 projections, selected)
- Nominal GDP (in million Qatari riyals) across 2006–2014: 207,183; 258,590; 365,482; 301,599; 396,545; 470,340; 525,107; 566,825; 609,930.
- Real GDP growth (percent): 15.0; 13.7; 15.8; 9.0; 18.5; 14.3; 9.2; 4.7; 4.9.
- Central government finances (total revenue, million Qatari riyals): 86,062; 117,790; 140,947; 149,885; 165,309; 206,983; 231,989; 243,765; 254,250.
- Total expenditure (million Qatari riyals): 67,147; 84,728; 98,855; 111,486; 128,557; 142,626; 153,460; 164,429; 176,208.
- Overall balance (million Qatari riyals): 18,915; 33,062; 42,092; 38,399; 36,752; 64,357; 78,529; 79,335; 78,042.
  - Overall balance (in percent of GDP): 8.6; 11.6; 12.0; 11.8; 8.9; 13.3; 14.7; 13.7; 12.5.
- Current account (million U.S. dollars) projected: 16,113; 21,823; 33,138; 12,997; 24,728; 49,038; 50,298; 50,403; 47,076.
  - In percent of GDP: 28.3; 30.7; 33.0; 15.7; 22.7; 38.0; 34.9; 32.4; 28.1.
- Total external debt (excluding banks, million U.S. dollars) projected: 19,486; 24,771; 35,430; 50,863; 67,424; 76,859; 81,938; 87,469; 91,260.
  - In percent of GDP: 34.2; 34.9; 35.3; 61.4; 61.9; 55.9; 56.8; 56.2; 54.5.

### IMF relations and institutional arrangements (informational annex)
- Membership Status: Joined 09/08/72; Article VIII, 06/04/73.
- Quota (SDR million): 263.80 (100.00 percent).
- Fund holdings of currency: 212.48 (80.55 percent of quota).
- Reserve position in Fund: 51.32 (19.45 percent of quota).
- SDR Department: Net cumulative allocation 251.40 (100.00 percent); Holdings 268.11 (106.65 percent).
- Outstanding purchases and loans: None.
- Exchange arrangements: The Qatari riyal has been pegged to the U.S. dollar at QR 3.64 = $1.00 since July 2002, following an unofficial peg that was in effect since June 1980. Qatar has accepted the obligations under Article VIII, Sections 2, 3, and 4(a) and maintains an exchange system free of restrictions on current international transactions; exchange restrictions for security reasons based on UN Security Council Resolutions have been notified to the Fund.

*Prepared by the Middle East and Central Asia Department; January 22, 2010. Sources: Data provided by the authorities; and IMF staff estimates and projections.*

### 2008. The Staff Report and its supplement were discussed by the Executive Board on

### _cr1041 - 2008. The Staff Report and its supplement were discussed by the Executive Board on

### X. FSAP Participation, ROSCs, and OFC Assessments
- FSAP missions: January 2007 and May 2007.
- LEG assessment: detailed assessment of the Qatari anti-money laundering and combating the financing of terrorism (AML/CFT) framework against the Financial Action Task Force (FATF) 40+9 Recommendations, February 2007.
- Adoption and publication:
  - Report presented to MENAFATF and FATF and adopted as their mutual evaluation at plenary meetings of April 2008 and June 2008.
  - Final report published on the Fund website.
  - A ROSC circulated to the Executive Board for information in September 2008.

### XI. Technical Assistance
- STA November/December 1994: Multisector Statistics Mission
- MAE June 1995: Financial Sector Reform
- MAE April 1997: Reform of the Qatar Central Bank’s legal framework
- MAE September 1998/January 1999: Introducing government bonds and treasury bills
- STA April 2000: Real Sector Statistics
- STA May 2001: Balance of Payments Statistics
- STA January 2005: Multisector Statistics
- STA April 2006: Government Finance Statistics
- LEG November 2006: AML/CFT Pre-assessment
- STA April 2007: GDDS Assessment
- LEG October 2009 (ongoing): AML/CFT Long-Term Advisor providing TA.

### XII. Resident Representative
- None

### Annex II — Relations with the World Bank Group (As of December 7, 2009)
- Strategic Cooperation Program (SCP): cooperation is recent and ad hoc, based on government requests for advisory services on strategic development issues. First formal technical cooperation agreement signed April 2003 (Public Transport Sector Reform study).
- Labor Market Strategy (LMS): manpower planning exercise (2003) evolved into LMS completed June 2005; Bank assisting government in LMS implementation.
- World Bank assistance: planning and support for an international economic forum on economic diversification and development in the GCC.
- Ongoing Projects:
  - Labor Market Strategy (LMS) Implementation
  - Economic Diversification and Development in the GCC: Meeting the Challenges
- Completed Projects (selected): 
  - Knowledge Economy Strategy and Implementation Assistance (FY09)
  - Workshop on “Partnering for Value, Innovation and Job Creation: PPPs in the GCC” (FY06)
  - A macroeconomic modeling workshop (FY06)
  - Evaluation of Qatar’s Payments System (FY05)
  - Labor Market Strategy (FY04)
  - Investment Climate Workshop (FY04)
  - Public Transport Sector Study (FY03)

### Annex III — Statistical Issues (As of December 9, 2009)
I. Assessment of Data Adequacy for Surveillance
- General: Economic data broadly adequate for surveillance but scope for improving frequency, timeliness and coverage; most affected areas: real GDP, financial accounts of the balance of payments, and external debt statistics.
- National Accounts:
  - Key aggregates limited to quarterly estimates of GDP at current prices.
  - Qatar does not publish GDP at real prices.
  - Accuracy in the nonhydrocarbon sector undermined by lack of comprehensive source data.
- Price statistics:
  - Monthly CPI published, reweighted and rebased (2006=100), but index remains deficient.
  - Domestic rents component uses only new rents, leading to overshooting of the index.
- Government finance statistics:
  - Budget and outcomes should be presented according to GFSM 2001 guidelines with greater detail on major expenditure and non-oil revenue categories.
  - Budget data should be made consistent with public sector data in monetary survey and balance of payments.
  - Financing items in the budget are not up to date; access to this and previous fiscal year outcomes would enhance analysis.
  - Some public sector entities—largely commercial—should not be mixed with central government accounts.
  - MOF prioritizing implementation of GFSM recommendations to start dissemination of complete annual government finance tables.
- Monetary statistics:
  - Monetary data for QCB and commercial banks generally timely and high quality.
  - QCB reports monetary data regularly to STA for IFS publication on a monthly basis with a lag of about three weeks.
  - Monthly and quarterly data published in the Quarterly Statistics Bulletin.
- Balance of Payments:
  - QCB has made progress: ITRS forms expanded; reporting forms for major oil and gas companies introduced.
  - System not yet stabilized; glaring omissions remain in financial accounts.
  - No compilation for inward or outward direct investment; no portfolio investment data for nonbank sector; errors and omissions remain large.
  - Official statistics seem to underestimate total imports.
  - Source data for government external assets not provided to QCB for BOP compilation.
  - An estimate for flows of government external assets based on budget data is included, but no information on government’s stock of external assets.
  - Inconsistency in coverage of flows and stocks of official reserves:
    - BOP flows of official reserves include changes in stock of QCB reserves and estimate for change in stock of external assets of the government.
    - Stock of official reserves published in IFS includes only the stock of the QCB.
  - Authorities worked with STA to report BOP data in BPM5 format, but insufficient detailed information available to complete this process.
- External debt:
  - No official information published on amount or breakdown of external debt.
  - Detailed data on medium- and long-term external debt are provided to missions during Article IV discussions.
  - Qatar has issued several international bonds in recent period.
  - Important to improve information flow on external debt and its maturity profile.

II. Data Standards and Quality
- Qatar a GDDS participant since December 2005.
- April 2007 GDDS mission updated the GDDS Summary Table II and assessed dissemination practices relative to SDDS requirements; identified milestones for SDDS graduation.
- Staff assisted authorities in developing a National Summary Data Page (NSDP) and an Advance Release Calendar (ARC).

### Qatar: Table of Common Indicators Required for Surveillance (As of January 4, 2010)
- Exchange Rates: Date of latest observation Nov. 2009; Date received Dec. 2009; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M
- International Reserve Assets of the Monetary Authorities: Nov. 2009; Dec. 2009; M; M; M
- Reserve/Base Money: Nov. 2009; Dec. 2009; M; M; M
- Broad Money: Nov. 2009; Dec. 2009; M; M; M
- Central Bank Balance Sheet: Nov. 2009; Dec. 2009; M; M; M
- Consolidated Balance Sheet of the Banking System: Nov. 2009; Dec. 2009; M; M; M
- Interest Rates: Nov. 2009; Dec. 2009; M; M; M
- Consumer Price Index: Oct 2009; Nov. 2009; M; M; M
- Revenue, Expenditure, Balance and Composition of Financing – General Government: ...; ...; NA; NA; NA
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: 2008/09; May 2009; Q; I; I
- Stocks of Central Government and Central Government-Guaranteed Debt: 2009; Nov 2009; A; I; I
- External Current Account Balance: 2008; March 2009; A; A; Q
- Exports and Imports of Goods and Services: 2008; March 2009; A; A; Q
- GDP/GNP: 2009 (Q3); Dec. 2009; Q; I; I
- Gross External Debt: 2009; Nov 2009; A; I; I
- International Investment Position: Oct. 2009 (incomplete); Nov. 2009; I; I; NA

Notes from table:
- 1 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
- 2 Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
- 3 Foreign, domestic bank, and domestic nonbank financing.
- 4 The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
- 5 Including currency and maturity composition.
- 6 Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).
- 7 Includes external gross financial asset and liability positions vis-à-vis nonresidents.

### Public Information Notice (PIN) No. 10/22 — IMF Executive Board Concludes 2009 Article IV Consultation with Qatar (February, 17 2010)
Background and recent performance:
- Article IV consultation concluded on a lapse of time basis on February 8, 2010.
- Real GDP growth:
  - 2008: 16 percent (estimated)
  - 2009: 9 percent (estimated)
- Drivers: expansions in LNG and condensates production, strong nonhydrocarbon sector performance.
- Prices and rents:
  - Sharp fall in domestic house rents led to deflation in 2009—the sharpest among GCC countries.
- Fiscal policy: continued development spending with re-prioritization of a few projects.
- External current account: estimated large surplus about 15.7 percent of GDP in 2009 due to rebound in oil and gas prices.
- Central bank gross reserves: strengthened to around 5 months of imports of goods and services.
- Banking system: limited impact from global turmoil and Dubai developments; preemptive equity injections and asset purchases improved resilience.
- Equity market: weak sentiment weighed on share prices; equity market rebounded only marginally in 2009.

Projections and risks:
- 2010:
  - Growth expected stronger, driven by rapid LNG production expansion, manufacturing and construction pick-up.
  - Inflation expected around 1 percent (following 2009 deflation), due to increases in international food and raw material prices and planned infrastructure investments.
  - Fiscal and external current accounts projected to remain in surplus, reflecting favorable oil prices.
- Medium-term outlook: positive with continuing strong growth, moderate inflation, and fiscal and external surpluses.
- Main risks: slow global recovery, large further decline in real estate prices, reduced availability of financing for projects, and additional unexpected adverse financial developments in the region.
- Potential overheating risk from projected high medium-term growth rates; need to prioritize and sequence spending towards infrastructure.

Executive Board Assessment and recommendations:
- Commendations:
  - Authorities successfully steered the economy through the global financial crisis.
  - Supportive macroeconomic policies helped maintain investment and produced sizeable fiscal and external surpluses.
  - Central bank macro-prudential policies and timely interventions moderated crisis impact on banking system.
- Key challenges and recommendations:
  - Damp potential overheating risk by carefully prioritizing infrastructure projects to mitigate supply bottlenecks and cost-push inflation.
  - Increase absorptive capacity and diversify the economy away from hydrocarbon production and exports.
  - Establish a formal institutional structure to develop a medium-term debt management strategy, given reliance on investment financed through debt.
  - Use available fiscal space prudently; enhance implementation capacity and uphold intergenerational equity in resource revenue use.
  - Maintain capital spending until private sector activity becomes firmly entrenched; fiscal stance judged appropriate.
  - Strengthen risk management practices and overall supervision of the banking system to avoid rebuilding excessively risky asset portfolios.
  - Close regulatory gaps during transition to a single regulator of financial services; support establishment of a single regulator in the near future.
  - Continue monitoring regional and global financial risks; central bank initiated comprehensive review of prudential regulations and monetary policy instruments.
  - Confirmed that Qatari riyal is in line with fundamentals and peg to the U.S. dollar remains appropriate.
  - Encouraged continued improvement in quality of statistics (national income and balance of payments), seek technical assistance to strengthen BOP statistics and compile comprehensive international investment position data.
- Next Article IV consultation expected to be held on the standard 12-month cycle.

### Qatar: Selected Economic and Financial Indicators, 2005–10 (Key extracted figures)
Production and Prices
- Real GDP (percent per annum):
  - 2005: 9.2
  - 2006: 15.0
  - 2007: 13.7
  - 2008: 15.8
  - 2009: 9.0
  - 2010: 18.5
- Hydrocarbon (percent): 2005 6.0; 2006 10.7; 2007 12.9; 2008 17.1; 2009 10.0; 2010 25.2
- Nonhydrocarbon GDP (percent): 2005 13.1; 2006 19.9; 2007 14.5; 2008 14.5; 2009 8.0; 2010 11.5
- Nominal GDP (billion U.S. dollars): 2005 42.5; 2006 56.9; 2007 71.0; 2008 100.4; 2009 82.9; 2010 108.9
- Consumer price index (period average): 2005 8.8; 2006 11.8; 2007 13.8; 2008 15.0; 2009 -5.5; 2010 1.0

Public Finance (in percent of GDP on fiscal year basis)
- Total revenue: 2005 39.2; 2006 39.1; 2007 41.3; 2008 40.3; 2009 46.1; 2010 39.8
- Hydrocarbon revenue: 2005 27.7; 2006 25.2; 2007 24.8; 2008 22.9; 2009 19.5; 2010 21.6
- Other revenue: 2005 11.5; 2006 13.9; 2007 16.5; 2008 17.4; 2009 26.6; 2010 18.3
- Total expenditure and net lending: 2005 30.3; 2006 30.5; 2007 29.7; 2008 28.3; 2009 34.3; 2010 31.0
- Current expenditure: 2005 19.5; 2006 22.6; 2007 17.8; 2008 18.8; 2009 22.6; 2010 19.3
- Wages and salaries: 2005 4.0; 2006 5.9; 2007 5.2; 2008 5.4; 2009 6.7; 2010 5.4
- Capital expenditure: 2005 10.7; 2006 7.9; 2007 11.8; 2008 9.5; 2009 11.7; 2010 11.7
- Overall fiscal balance (deficit -): 2005 8.9; 2006 8.6; 2007 11.6; 2008 12.0; 2009 11.8; 2010 8.9

Money (annual change in percent)
- Broad money: 2005 44.6; 2006 38.0; 2007 39.5; 2008 19.7; 2009 16.4; 2010 11.6
- Claims on private sector: 2005 63.5; 2006 45.9; 2007 51.3; 2008 42.4; 2009 7.0; 2010 11.6

External Sector (in million U.S. dollars, unless otherwise stated)
- Exports of goods and services: 2005 28,709; 2006 39,276; 2007 51,482; 2008 71,193; 2009 52,171; 2010 76,415
  - Crude oil and refined petroleum products: 2005 14,122; 2006 17,840; 2007 21,178; 2008 28,092; 2009 17,202; 2010 25,182
  - LNG and related exports: 2005 8,738; 2006 13,360; 2007 18,710; 2008 30,808; 2009 23,615; 2010 35,503
- Imports of goods and services: 2005 -12,575; 2006 -21,767; 2007 -27,172; 2008 -34,848; 2009 -34,260; 2010 -45,687
- Current account: 2005 14,100; 2006 16,113; 2007 21,823; 2008 33,138; 2009 12,997; 2010 24,728
  - In percent of GDP: 2005 33.2; 2006 28.3; 2007 30.7; 2008 33.0; 2009 15.7; 2010 22.7
- Central Bank reserves, net: 2005 4,555; 2006 5,410; 2007 9,546; 2008 9,832; 2009 19,238; 2010 20,257
  - In months of imports of goods and services (next 12 months): 2005 2.5; 2006 2.4; 2007 3.3; 2008 3.4; 2009 5.1; 2010 4.7
- Exchange rates (riyals/U.S. dollars): 2005 3.64; 2006 3.64; 2007 3.64; 2008 3.64; 2009 3.64; 2010 ...
- Real effective exchange rate (percent change): 2005 6.9; 2006 8.1; 2007 3.1; 2008 3.6; 2009 13.5; 2010 ...

Sources: Data provided by the authorities; and IMF staff estimates and projections.

*IMF Public Information Notice and staff report materials as presented in the source document.*

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