IMF Executive Board Concludes 2018 Article IV Consultation with Qatar
IMF News, May 30, 2018
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- Published: May 30, 2018
Growth performance and outlook
- Non-hydrocarbon real GDP growth is estimated to have moderated to about 4 percent in 2017 due to on-going fiscal consolidation and the effect of the diplomatic rift.
- Overall real GDP growth was 2.1 percent in 2017.
- A self-imposed moratorium on new projects in the North Oil Field until the second quarter of 2017 and the OPEC+ deal restrained hydrocarbon output growth.
- Headline inflation remained subdued, primarily due to lower rental prices; the real estate price index fell by 11 percent in 2017 (year-on-year basis) following cumulative increase of 53 percent during 2013–16.
- Near-term outlook: overall GDP growth of 2.6 percent projected for 2018.
- Inflation projection: expected to peak at 3.9 percent in 2018—as the impact of the value-added tax being introduced during the second half of 2018 would mostly be felt in that year—before easing to 2.2 percent in the medium term.
- Risks: lower-than-envisaged oil prices, tighter global conditions and an escalation of the diplomatic rift.
Fiscal position and public finance
- Fiscal deficit estimated to have narrowed to about 6 percent of GDP in 2017 from 9.2 percent in 2016.
- The deficit has been financed by a combination of domestic and external financing.
- Public debt estimated at 54 percent of GDP as at end-2017 and assessed as sustainable.
- Current account improving in the context of increased oil and gas.
- From the Selected Economic and Financial Indicators table (2014–19):
- Total revenue: 45.7 (2014); 42.8 (2015); 30.7 (2016); 26.3 (2017); 28.9 (2018); 31.5 (2019).
- Expenditure: 33.4 (2014); 41.5 (2015); 39.9 (2016); 32.4 (2017); 30.4 (2018); 28.2 (2019).
- Central government fiscal balance: 12.3 (2014); 1.3 (2015); -9.3 (2016); -6.0 (2017); -1.4 (2018).
- Capital expenditure: 8.4 (2014); 13.6 (2015); 18.5 (2016); 13.8 (2017); 14.6 (2018); 12.4 (2019).
Banking sector and financial stability
- Banking sector assessed as healthy overall with high asset quality and strong capitalization.
- As at end-September 2017:
- Capital adequacy ratio of 15.4 percent.
- Return on assets of 1.6 percent.
- Non‑performing loans ratio of 1.5 percent.
- Provisioning ratio of non‑performing loans of 85 percent.
- Liquid asset to total asset ratio of 27.3 percent.
- Noted concerns:
- Real estate price softening and loan concentration in the real estate sector warrant vigilance.
- Bank reserves have declined since 2015.
- FinTech will likely create new challenges and opportunities requiring additional regulatory capacity.
Executive Board Assessment and policy recommendations
- Directors noted considerable buffers and sound macroeconomic policies that helped absorb shocks from lower hydrocarbon prices and the diplomatic rift.
- Fiscal policy recommendations and observations:
- Qatar has ample fiscal space to continue with gradual fiscal consolidation to ensure sufficient saving of the hydrocarbon wealth for future generations.
- Support for enhancing non‑oil revenue, including putting in place a VAT and excises.
- Strengthened expenditure control, emphasis on further public‑service reform and accelerated reform of public utility companies to improve economic efficiency.
- Importance of wage reform to reduce the public to private wage gap.
- Recommendation to enhance the medium‑term fiscal framework with a clear medium‑term objective to guide fiscal efforts.
- Improvement in reporting of fiscal accounts to strengthen accountability, transparency, and policy effectiveness.
- Financial sector recommendations and observations:
- Support for efforts to strengthen macro prudential regulation and consolidated supervision.
- Further progress in improving liquidity monitoring and forecasting to anticipate and plan for potential system‑wide pressures.
- Encouragement to continue to strengthen the AML/CFT framework and address identified gaps.
- Exchange rate and diversification:
- Directors concurred that the currency peg to the U.S. dollar continues to serve Qatar well as a monetary anchor; exchange rate regime should be reviewed periodically.
- Support for efforts to enhance economic diversification and promote private sector development, including labor law reform, privatization, special economic zones, and increased foreign ownership limits.
- Caution against import‑substitution strategies and special tax incentives or labor policies that might result in market distortions.
- Additional measures to improve the business environment—contract enforcement and reform of the insolvency mechanism—will boost private sector growth prospects.
- Laws promoting equal remuneration and discouraging gender‑based discrimination would contribute to inclusive growth.
- Encouragement to continue to enhance macroeconomic statistics.
Key statistics (from Selected Economic and Financial Indicators, 2014–19)
- Real GDP (2013 prices): 4.0 (2014); 3.6 (2015); 2.2 (2016); 2.1 (2017); 2.6 (2018); 2.7 (2019).
- Hydrocarbon production: -0.6 (2014); -0.5 (2015); -1.0 (2016); 0.2 (2017); 1.0 (2018); 1.2 (2019).
- Nonhydrocarbon production: 9.8 (2014); 8.2 (2015); 5.6 (2016); 4.1 (2017).
- CPI inflation (average): 3.4 (2014); 1.8 (2015); 0.4 (2016); 3.9 (2017); 3.5 (2019).
- Broad money growth: 10.6 (2014); -4.6 (2015); 21.3 (2016); 5.5 (2017); 6.1 (2018).
- Credit to private sector: 20.3 (2014); 19.7 (2015); 6.5 (2016); 6.4 (2017); 6.6 (2018).
- Exports (percent change): 126.7 (2014); 77.3 (2015); 57.3 (2016); 65.1 (2017); 75.9 (2018); 76.2 (2019).
- Imports (percent change): -31.1 (2014); -28.5 (2015); -31.9 (2016); -34.1 (2017); -37.8 (2018); -35.7 (2019).
- Current account balance (in percent GDP): 24.0 (2014); -5.5 (2015); 2.5 (2016).
- External debt (percent GDP): 48.6 (2014); 73.8 (2015); 110.9 (2016); 88.0 (2017); 86.6 (2018); 82.7 (2019).
- Central bank reserves 2/ (in months of imports): 43.1 (2014); 37.2 (2015); 31.7 (2016); 14.9 (2017); 19.6 (2018); 23.2 (2019).
- Real effective exchange rate (percentage change): 11.2 (2014).
IMF Press Release No. 18/202 — May 30, 2018