IMF Staff Concludes Virtual Visit with Qatar
IMF News, December 19, 2020
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- Published: December 19, 2020
Health response and containment
- Swift implementation of containment measures limited the health impact of the Covid-19 pandemic.
- Qatar implemented strict prevention and containment measures and had one of the highest per-capita testing rates in the world.
- The country resumed all economic activities since September.
- Qatar provided medical and financial pandemic relief to many other countries.
Policy response and liquidity support
- Policy response centered around a QR75 billion package to support the economy.
- Key elements of the package:
- Qatar Central Bank (QCB) zero-percent repo facility (QR50 billion) to facilitate ample liquidity in the banking system.
- Credit guarantee scheme totaling QR5 billion, administered by the Qatar Development Bank, to support small and medium enterprises (SMEs) and protect jobs.
- Measures allowing households and businesses to defer loan repayments until the end of the year.
- Waiver of rental and utility fees.
- Measures to ensure salary payments and/or basic allowances to workers and to reduce custom tariffs on critical supplies, all totaling QR2.1 billion.
- QCB lowered its policy rates to support credit to the private sector.
Fiscal position and financing
- Economy projected to contract by about 2.5 percent in 2020.
- Current account balance forecast to turn into a deficit of about 1.5 percent of GDP in 2020 due to lower hydrocarbon exports.
- Proactive reprioritization of spending helped limit the fiscal deficit to a projected 2.5 percent of GDP in 2020.
- The $10 billion international bond issuance in April attracted significant investor interest and allowed Qatar to preemptively cover its external financing needs.
- 2021 budget projections:
- Projects a deficit of around 6 percent of GDP.
- Revenues budgeted to decline by 24 percent with respect to the 2020 budget due to a delayed pass-through from oil to gas prices, lower corporate tax receipts, and a prudent oil assumption.
- Expenditures projected to decline by 8 percent, mainly driven by lower capital spending (a 20-percent decrease compared to 2020) as World Cup-related projects near completion.
- Policy recommendation: continue efforts to mobilize non-oil revenues and optimize expenditures; gradual fiscal consolidation to help preserve net public sector wealth.
Economic outlook and risks
- Real GDP growth projected at 2.7 percent in 2021, supported by increasing gas production and the rebound in domestic demand.
- Risks tilted to the downside, mainly from:
- Uncertainty about the global growth recovery.
- Success and speed of vaccination and pandemic resolution.
- Oil prices, whose outlook depends on the global recovery.
- Upside risks:
- Successful resolution of the regional diplomatic rift.
- Stronger-than-envisaged global growth rebound.
Financial sector soundness
- Latest financial soundness indicators show the banking sector remains well-capitalized and liquid.
- The moratorium on loan repayments provides an opportunity for banks and businesses to adjust.
- Continued proactive monitoring of credit portfolio risks recommended to support banks’ role in the recovery.
- IMF welcomes continued cooperation across financial sector regulators to strengthen regulatory and supervisory frameworks.
Structural reforms and diversification
- Ambitious structural reform agenda underpins efforts to enhance long-term potential growth and economic diversification.
- Noted reforms and measures:
- Abolishment of the Kafala sponsorship system and strengthening labor protection to facilitate labor mobility and spur productivity.
- New real estate and public-private partnerships (PPP) laws to help improve competitiveness.
- Reforms to strengthen minority investor protection, contract enforcement, and insolvency resolution to improve the business environment, mobilize foreign direct investment, and support diversification.
Engagement and next steps
- IMF team led by Ms. Mercedes Vera-Martin held virtual meetings from December 6-14, 2020.
- The team met with Minister of Finance H.E. Ali Shareef Al-Emadi, Governor of the Qatar Central Bank H.E. Sheikh Abdulla Bin Saoud Al-Thani, other senior officials, and representatives of the private sector.
- The mission will not result in a Board discussion.
- The team looks forward to continuing the dialogue ahead of the 2021 Article IV Consultation.
IMF staff statement, December 19, 2020.