IMF Staff Completes 2023 Article IV Mission to Qatar

IMF News, November 21, 2023

Source details

Mission dates: November 1–14, 2023.
Executive Board discussion scheduled: January 2024.
Short-term normalization after World Cup-driven boom: economic growth "has been normalizing" in 2023.
Output projection: expected to expand by about 1¾ percent per annum during 2023–25.
Non-hydrocarbon sector: growing at 2¾ percent (driven by domestic demand, including North Field expansion construction, and robust tourism).
Medium-term growth: set to increase to around 5 percent per annum supported by LNG production expansion and reform efforts under the Third National Development Strategy (NDS3).
Inflation: "will likely moderate to 2 percent".
External and fiscal balances: "the fiscal and current accounts are projected to remain in surpluses over the medium term."
Risk assessment: "Risks to the outlook are broadly balanced."

Recent performance: "Broad fiscal discipline amid sizeable hydrocarbon windfalls in 2022–23 has strengthened fiscal position significantly."
Near-term outlook: "Continued fiscal prudence is expected under the upcoming 2024 budget."
Medium-term budgeting: the next medium-term budget is being developed and will cover 5 years for the first time to support NDS3 initiatives.
Policy priorities and recommendations:
- Sustain fiscal prudence while balancing transformation ambitions.
- Accelerate revenue diversification through further mobilization of non-hydrocarbon tax revenues.
- Enhance spending efficiency and reorient public investment to facilitate private sector growth.
- Implement and strengthen a well-functioning medium-term fiscal framework and greater fiscal transparency.
- Continue efforts to enhance efficiency, including implementation of program-based budgeting.

Central bank actions: "The Qatar Central Bank (QCB) has maintained price and financial stability."
Monetary context: monetary policy tightened in tandem with the U.S. Federal Reserve; consistent with the currency peg to the U.S. dollar.
Banking sector soundness: "Banks remain healthy," though the non-performing loan ratio "has edged up" as pandemic-related restructured loans reverted to non-performing, output growth normalized, and financial conditions tightened.
Mitigating factors: "Banks’ relatively high provisioning mitigates the risks."
Macroprudential measures: QCB has refined measures to reduce risks associated with banks’ external asset-liability mismatches, especially short maturities.
Recommendations:
- Continued diligence to maintain banking sector resilience in a "higher-for-longer" interest rate environment.
- Complement prudential vigilance with reforms to deepen domestic financial markets, as envisaged in the upcoming financial sector strategy.

Strategic juncture: Qatar is shifting from a state-led model to a more dynamic, market-oriented one driven by the private sector.
Role of NDS3: the upcoming Third National Development Strategy provides an opportunity to accelerate economic transformation toward a knowledge-based and inclusive economy supported by private-sector led growth.
Reform priorities:
- Enhance human capital and labor market dynamism.
- Improve the business environment to support private-sector growth.
- Further digitalization with attention to potential risks.
- Strengthen climate resilience and advance the green transition.
Implementation support: Targeted reforms should be supported by reoriented public investment, program-based budgeting, medium-term fiscal frameworks, and greater fiscal transparency.

IMF Staff Completes 2023 Article IV Mission to Qatar, November 21, 2023.