IMF Executive Board Concludes 2019 Article IV Consultation with Qatar
IMF News, June 3, 2019
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- Published: June 3, 2019
Economic performance and 2018 outcomes
- Real GDP growth is estimated at 2.2 percent in 2018, up from 1.6 percent in 2017.
- Headline inflation remained low.
- The central government’s fiscal position switched to a surplus of 2.3 percent of GDP in 2018 from a sizable deficit in 2017.
- The current account is estimated to have reached a surplus of 9.3 percent of GDP in 2018, largely reflecting higher average oil prices.
- Reserves reached US$31 billion (5½ months of imports) at end-December 2018.
- Qatar issued US$12 billion in international bonds, which was more than four times oversubscribed, with lower spreads than in previous issues.
- Recovery in non-resident deposits and foreign bank funding helped banks increase private sector credit.
- After an 82 percent increase during 2012–16, real estate prices fell by 15 percent during 2017–18 (QCB real estate price index).
Macro-financial outlook and risks
- Overall GDP growth is projected to reach 2.6 percent in 2019 from 2.2 percent in 2018.
- Projected non-hydrocarbon growth for 2019 reflects lingering multiplier effects of increased capital expenditures, gradual fiscal consolidation, ample liquidity, and increased private sector activity.
- Medium-term growth will be supported by increased gas production from the Barzan field and a planned increase in LNG production capacity by 40 percent.
- Inflation is projected to peak at 3.7 percent in 2020 with the introduction of a VAT, but converge to 2 percent in the medium term.
- A current account surplus of about 4.6 percent of GDP is envisaged for 2019.
- Over the medium term, the current account would be in modest surplus.
- Main downside risks:
- Lower-than-projected hydrocarbon prices (would deteriorate external and fiscal positions and raise public debt).
- Rising trade and geopolitical tensions (could undermine investor confidence and weaken fiscal and external positions).
- Qatar is considered well placed to contain adverse macro-financial implications of downside risks due to substantial buffers and prudent policies.
Fiscal policy assessment and recommendations
- Fiscal consolidation has shifted the fiscal balance to surplus; gradual consolidation is appropriate given substantial fiscal space.
- In 2019, expenditure restraint and lagged revenue impact of higher oil prices would result in further improvement of fiscal position to about 3 percent (from 2.3 percent in 2018).
- Over the medium term, the fiscal position would be in moderate surplus due to broadly stable hydrocarbon prices and sustained expenditure control.
- Policy recommendations:
- Enhance non-hydrocarbon revenues, including continuing introduction of a VAT, to build a broad-based tax system.
- Contain growth of the wage bill and put public investment on a downward path.
- Implement education and labor market measures to complement public-sector employment reform.
- Accelerate strategy to further reduce utility subsidies, combined with strengthening social protection.
- Strengthen fiscal policy frameworks to avert procyclicality, mitigate risks, and ensure intergenerational equity.
- Use fiscal indicators that emphasize intergenerational equity and indicators to better manage oil price volatility.
- Improve coordination among fiscal authorities, QCB and QIA; complement with a medium-term budget framework and accelerate transition to a performance-based medium-term expenditure framework.
- Publish comprehensive budget information, including fiscal risks, budget execution data, and the composition of QIA’s assets, to support transparency.
Financial sector and banking
- Banking sector soundness indicators (end-September 2018):
- CAR of 16 percent.
- ROA of 1.6 percent.
- Non-performing loans ratio of 1.7 percent.
- Provisioning ratio of 83 percent.
- Liquid-asset-to-total-asset ratio of 29.7 percent.
- System-wide loan-to-deposit (LTD) ratio of 103 percent, higher than the CB’s guidance of 100 percent (credit growth outpaced deposits).
- Recommendations for the financial sector:
- Continue close monitoring of banking sector assets given softening real estate prices.
- QCB should consider introducing additional indicators such as vacancy rates to assess real estate developments.
- Emphasize risk-based supervision to detect vulnerabilities earlier.
- Enforce the loan-to-deposit ratio to encourage banks to reduce leverage.
- Strengthen modalities for exchange of information between fiscal and monetary authorities to avert sharp swings in liquidity.
- Strengthen financial supervision and the regulatory framework to manage risks from financial innovation and protect consumers.
Structural reforms and diversification
- Structural reform priorities to support private sector-led and inclusive growth:
- Continue reforms on the business environment, special economic zones (SEZs), labor law, increased foreign ownership limits, and privatization.
- SEZs can be helpful in the short term but should not replace economy-wide structural reforms.
- Use domestic and export-market competition as benchmarks to hold government-supported beneficiaries accountable.
- Improve contract enforcement, strengthen competition via insolvency reform, and ensure equal remuneration and gender equality to support inclusive growth.
Selected economic and financial indicators, 2015–2020 (Prel. = Preliminary; Proj. = Projection)
- Real GDP (2013 prices)
- 2015: 3.7
- 2016: 2.1
- 2017: 1.6
- 2018: 2.2
- 2019: 2.6
- 2020: 3.2
- Hydrocarbon
- 2015: -0.6
- 2016: -0.9
- 2017: -0.7
- 2018: -1.1
- 2019: 0.4
- 2020: 1.8
- Nonhydrocarbon
- 2015: 8.5
- 2016: 5.3
- 2017: 3.8
- 2018: 4.6
- 2019: 4.3
- CPI inflation (average)
- 2015: 2.7
- 2016: 0.2
- 2017: 0.1
- Public finance (percent of GDP)
- Total revenue
- 2015: 43.6
- 2016: 30.9
- 2017: 26.9
- 2018: 31.7
- 2019: 32.8
- 2020: (blank in source)
- Expenditure
- 2015: 42.3
- 2016: 40.1
- 2017: 33.5
- 2018: 29.4
- 2019: 29.8
- 2020: 28.3
- Current
- 2015: 28.5
- 2016: 21.5
- 2017: 18.6
- 2018: 15.5
- 2019: 17.1
- 2020: 17.2
- Capital
- 2015: 13.8
- 2016: 14.8
- 2017: 13.9
- 2018: 12.6
- 2019: 11.2
- Central government fiscal balance
- 2015: 1.3
- 2016: -9.2
- 2017: -6.6
- 2018: 2.3
- 2019: 3.0
- 2020: 3.4
- Money and credit
- Broad money
- 2015: -4.6
- 2016: 21.3
- 2017: -6.5
- 2018: 7.9
- Credit to private sector
- 2015: 19.7
- 2016: 6.5
- 2017: 6.4
- 2018: 13.0
- 2019: 4.8
- 2020: 9.0
- External sector
- Exports
- 2015: 77.3
- 2016: 57.3
- 2017: 67.5
- 2018: 84.5
- 2019: 80.2
- 2020: 80.4
- Imports
- 2015: -28.5
- 2016: -31.9
- 2017: -30.8
- 2018: -33.2
- 2019: -33.9
- 2020: -34.6
- Current account balance (in percent GDP)
- 2015: -5.5
- 2016: 9.3
- 2017: 4.1
- 2018: (blank in source)
- External debt (percent GDP)
- 2015: 88.4
- 2016: 127.2
- 2017: 99.6
- 2018: 101.1
- 2019: 106.7
- 2020: 98.3
- Central bank reserves 2/
- 2015: 37.2
- 2016: 14.9
- 2017: 30.5
- 2018: 44.3
- 2019: 41.2
- in months of imports
- 2015: 7.0
- 2016: 6.1
- 2017: 5.5
- 2018: 7.7
- 2019: 6.9
- Exchange rate (Riyals/US$)
- 2015: 3.6
- Real effective exchange rate (percentage change)
- 2015: 11.0
- 2016: -3.7
IMF Executive Board Concludes 2019 Article IV Consultation with Qatar (Press Release No. 19/192), June 3, 2019.
