IMF Executive Board Concludes 2023 Article IV Consultation with Qatar
IMF News, February 7, 2024
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- Published: February 7, 2024
Overview and Outlook
- On January 11, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Qatar and considered and endorsed the staff appraisal without a meeting.
- Qatar’s decade-long diversification efforts culminated in the successful hosting of the 2022 FIFA World Cup.
- Real GDP growth in 2023 projected at 1.6 percent, following very strong performance in 2022 driven by World Cup-induced buoyancy and high hydrocarbon prices.
- Near-term normalization of growth is expected to continue, with non-hydrocarbon growth supported by:
- investment in public projects;
- construction of the North Field LNG expansion project; and
- spillovers to logistics, manufacturing, and trade.
- Visibility from the World Cup could continue to boost tourism.
- Medium-term growth is expected to average around 5½ percent, supported by significant LNG production expansion and initial reform gains from implementing the Third National Development Strategy (NDS3), set to be released soon.
- Headline inflation: likely to ease to below 3 percent in 2023, and further to around 2 percent over the medium term.
Fiscal and External Positions
- Amid high hydrocarbon prices, 2022 fiscal and current account positions strengthened significantly:
- Fiscal surplus reached 10½ percent of GDP in 2022.
- Current account surplus reached 26½ percent of GDP in 2022.
- Both fiscal and current accounts likely to remain in sizeable surplus, supported by elevated, albeit declining, hydrocarbon prices projected for the medium term, and Qatar’s LNG production expansion plus increasing demand from Asia and Europe.
- Executive Board guidance on fiscal strategy:
- Near term: balance discipline with growth; if downside risks materialize, deploy fiscal space through productive and efficient spending while maintaining broad fiscal prudence.
- Medium term: sustain prudent and countercyclical policy; accelerate revenue diversification including via VAT introduction; enhance current expenditure efficiency by rationalizing wage bill and gradually removing remaining subsidies; reorient expenditure from traditional infrastructure to reforms that facilitate transformation to a private sector-led growth model.
- Anchor a medium-term fiscal framework around maintaining intergenerational equity and complement with greater fiscal transparency.
Financial Sector and Monetary Policy
- Banking sector metrics (Q2 2023):
- Capital adequacy ratio: 19 percent.
- Return on equity: 14.6 percent.
- Nonresident deposits fell by more than one-third from the recent peak; partially replaced by higher public sector domestic deposits, reducing vulnerabilities amid tight global financial conditions.
- NPL ratio edged up to 3.8 percent; provisioning coverage ratio close to 80 percent.
- Banks were resilient to early-2023 financial market turmoil in advanced economies.
- Recommendations to safeguard financial stability:
- QCB should continue proactive supervision and regulation, supported by regular risk analysis and information sharing among financial supervisors.
- Deepen domestic capital markets.
- Review regularly measures to mitigate risks associated with banks’ exposure to short-term foreign funding.
- Balance opportunities and risks from Fintech and green financing initiatives with adequate regulations.
- Implement FATF action plan decisively following significant progress on technical compliance.
- Exchange rate policy:
- The exchange rate peg continues to represent a credible monetary anchor.
- Qatar’s external position in 2022 assessed as substantially stronger than the level implied by medium-term fundamentals and desirable policies, mainly due to elevated hydrocarbon prices.
- Further efforts recommended to strengthen liquidity management and coordination among fiscal and monetary authorities.
- Deepening domestic financial markets and maintaining low currency mismatches on bank balance sheets would reduce vulnerabilities and enhance monetary policy transmission.
Structural Reforms and Transformation
- Structural reforms in progress:
- Enhance protection and mobility of expatriate labor.
- Improve the business environment.
- Promote public-private partnerships.
- Attract private investment through the residency program and broadened foreign ownership provisions.
- Expand pension scheme coverage to more Qataris in the private sector to promote private sector employment.
- Advance digitalization.
- Implement climate initiatives guided by the National Environment and Climate Change Strategy and the Climate Change Action Plan.
- NDS3 is expected to provide an ambitious reform agenda to guide transformation toward a private sector-led, knowledge-based, more diversified and greener economy, as envisaged under Qatar’s National Vision 2030.
- Policy priorities to accelerate transformation:
- Attract more skilled expatriates.
- Improve education outcomes.
- Incentivize Qatari nationals to take up private sector jobs.
- Raise female labor force participation.
- Promote further trade liberalization.
- Ease access to finance.
- Continue enhancing administrative efficiency.
- Further digitalization and climate actions.
- Broadening gains from economic zones and centers to the wider economy.
- Reforms should be implemented comprehensively in a well-sequenced manner to boost potential growth.
Risks and Buffers
- Risks to the outlook are broadly balanced.
- Main downside risks stem from an unfavorable global environment:
- Conflict in Gaza and Israel has had no visible impact on Qatar to date; if protracted or worsened, potential channels of impact include more volatile hydrocarbon prices (though higher prices could improve fiscal and external positions), lower tourism and investment, and more costly external funding for banks.
- Domestically, protracted or severe real estate market weaknesses could negatively affect the banking system and broader economy.
- If downside risks materialize, Qatar has strong policy buffers to mitigate negative impacts.
- Upside scenario: accelerated reform efforts guided by NDS3 could further promote diversification and boost potential growth.
Executive Board Assessment (summary)
- Qatar has remained resilient to recent global shocks and its economic outlook is favorable.
- Output growth is normalizing after the 2022 World Cup-driven boom.
- Favorable medium-term outlook supported by:
- significant expansion of LNG production in the NF;
- expected gains from NDS3 implementation.
- Maintaining prudent macroeconomic policy and intensifying reform efforts will support resilience to shocks and accelerate economic transformation.
Selected Macroeconomic Indicators, 2020–24 (as presented)
- Quota: 735.1 million SDRs, 2023
- Per capita income: U.S.$80,626, 2022
- Life expectancy at birth: 79, 2021
- Population: 2.9 million, 2022
Production and prices (Real GDP, 2018 prices)
- 2020: -3.6
- 2021: 1.6
- 2022: 4.2
- 2023: 1.9
- Hydrocarbon 1/
- 2020: -2.0
- 2021: -0.3
- 2022: 1.7
- 2023: 2.6
- Nonhydrocarbon
- 2020: -4.5
- 2021: 2.8
- 2022: 5.7
- 2023: 1.0
- 2024: 2.0
- CPI inflation (average)
- 2020: -2.5
- 2021: 2.3
- 2022: 5.0
- 2023: 2.4
Public finances
- Revenue
- 2020: 32.6
- 2021: 29.6
- 2022: 34.8
- 2023: 31.5
- 2024: 31.1
- Expenditure
- 2020: 34.7
- 2021: 29.3
- 2022: 24.3
- 2023: 23.9
- Current
- 2020: 22.0
- 2021: 18.3
- 2022: 15.5
- 2023: 15.6
- 2024: 15.8
- Capital
- 2020: 12.7
- 2021: 11.1
- 2022: 8.8
- 2023: 8.3
- 2024: 8.1
- Central government fiscal balance
- 2020: -2.1
- 2021: 0.3
- 2022: 10.6
- 2023: 7.6
- 2024: 7.2
Money
- Broad money
- 2020: 3.8
- 2021: 1.4
- 2022: 17.4
- 2023: 2.9
- 2024: 4.1
- Credit to private sector
- 2020: 9.5
- 2021: 7.4
- 2022: 3.9
- 2023: 4.5
External sector
- Exports
- 2020: 49.1
- 2021: 58.7
- 2022: 68.4
- 2023: 58.5
- 2024: 56.4
- Imports
- 2020: 40.9
- 2021: 34.1
- 2022: 32.2
- 2023: 32.7
- Current account balance (billions of U.S. dollars)
- 2020: 14.6
- 2021: 26.7
- 2022: 17.6
- External debt
- 2020: 187.0
- 2021: 161.4
- 2022: 116.0
- 2023: 112.7
- 2024: 107.3
- Central Bank's reserves
- 2020: 28.3
- 2021: 23.5
- 2022: 20.1
- 2023: 21.9
- 2024: 22.4
- in months of next year’s imports
- 2020: 7.3
- 2021: 7.5
- Exchange rate
- 2020: 3.6
- Real effective exchange rate (change in percent) 2/
- 2020: -3.2
- 2021: -2.6
- 2022: 6.5
- 2023: 0.6
- 2/ Last observation October 2023.
Source: IMF Executive Board press release, February 7, 2024.
