IMF Team Completes a Staff Visit to Qatar

IMF News, August 30, 2017

Source details

Visit dates: August 13-20, 2017.
Press Release No. 17/334.
Summary statement issued by Mohammed El Qorchi at the conclusion of the visit (excerpted and paraphrased throughout).

The Qatari economy and financial markets are adjusting to the shock associated with the June 5 measures imposed following the diplomatic rift with some trading-partner countries.
The measures led to a sharp contraction in imports in June (40 percent year-over-year), with a slight recovery in July.
Efforts to diversify sources of imports and external financing and enhance domestic food processing are accelerating.
Some trade has been re-routed and alternative sources of food supply have been established, allaying fears of potential shortages.
Initial concerns that trade disruptions could impact the implementation of key infrastructure projects have been mitigated by:
- availability of an inventory of construction materials; and
- alternative sources of imports.

Non-oil growth projections:
- Projected to moderate to 4.6 percent in 2017 from 5.6 percent in 2016.
- Over the medium term, non-hydrocarbon GDP growth is expected to reach 4.8 percent, as structural reforms are implemented.
Headline inflation:
- Remains subdued at 0.8 percent year-on-year in June.
- Inflationary pressures observed in specific categories: transportation 8.9 percent; food costs 2 percent.
Longer-term risk:
- The diplomatic rift could weaken confidence and reduce investment and growth, both in Qatar and possibly in other GCC countries.

Fiscal consolidation is proceeding, underpinned by current expenditure cuts and an increase in non-oil revenues.
Central government deficit:
- Projected to decline to 5.9 percent in 2017 from 8.8 percent in 2016.
2018 budget expectations:
- Continue gradual fiscal consolidation.
- Focus on introduction of key tax policy and administration measures, including the introduction of a VAT and excises during the first half of 2018 and further rationalization of recurrent expenditures.

Current account position:
- Projected to improve to a surplus of about 3.9 percent of GDP in 2017 from a deficit of 7.7 percent in 2016.
- Improvement driven by contraction in imports and recovery in oil prices.

Qatar’s banking sector assessment:
- Remains sound, with high asset quality and strong capitalization.
Effects of the rift on banks:
- Banks’ liabilities to non-residents fell sharply in the aftermath of the diplomatic rift.
- Impact on banks’ balance sheets was mitigated by liquidity injections by the Qatar Central Bank and increased public sector deposits.
- These reactions reflected effective coordination and collaboration among key government agencies.
- Qatar monetary authorities stand ready to meet any future withdrawal of non-resident deposits.

Institutional and strategic reforms:
- The Supreme Council for Economic Policies and Investment approved the second national development strategy, with enhanced focus on economic diversification.
Labor, residency, and tourism measures:
- Qatar announced a visa-free entry program for 80 nationalities to stimulate tourism.
- Created a new permanent-resident status for foreigners.
- Approved a new law to protect domestic staff.

IMF Communications Department — Press release dated August 30, 2017.