Press Release No. 20/380

IMF Staff Concludes Virtual Visit with Qatar

December 19, 2020

• The Qatari authorities’ strong policy response helped mitigate the health and economic fallouts from the COVID19 pandemic and the decline in international oil prices
• A gradual recovery in Qatar —with real GDP growth projected at 2.7 percent in 2021—will be supported by increasing gas production and the rebound in domestic demand.
• The ambitious structural reform agenda underpins Qatar’s economic diversification efforts to enhance long-term potential growth.

Washington, DC – December 19, 2020: An International Monetary Fund (IMF) team, led by Ms. Mercedes Vera-Martin, held virtual meetings from December 6-14, 2020, to discuss recent economic and financial developments and outlook. At the end of the visit, Ms. Vera-Martin issued the following statement:

“The swift response in implementing containment measures helped limit the health impact of the Covid-19 pandemic. The authorities’ swift response —with strict prevention and containment measures and one of the highest per-capita testing rates in the world— allowed the country to resume all economic activities since September. Qatar has also provided medical and financial pandemic relief to many other countries around the world.

“The authorities’ policy response has mitigated the economic impact of the shocks. The policy response was centered around a QR75 billion package to support the economy. A key part of the package, the Qatar Central Bank’s (QCB) zero-percent repo facility (QR50 billion) facilitated ample liquidity in the banking system which, together with QCB’s lowering of its policy rates, has supported credit to the private sector. A credit guarantee scheme—totaling QR5 billion and administered by the Qatar Development Bank—has provided direct support to small and medium enterprises (SMEs) and protected jobs. Households and businesses were allowed to defer loan repayments until the end of the year and benefited from a waiver of rental and utility fees. These measures, along with others to ensure salary payments and/or basic allowances to workers and to reduce custom tariffs on critical supplies (all totaling QR2.1 billion), helped sustain economic confidence, dampen the impact of the shocks on businesses and households, and sustain the healthcare response.

‘The economy is projected to contract by about 2.5 percent in 2020 due to a lower global demand for hydrocarbons and subdued domestic activity during the lockdown in the Spring. With lower hydrocarbon exports, the current account balance is forecasted to turn into a deficit of about 1.5 percent of GDP this year. Sizable financial inflows allowed for a buildup in international reserves.

“The proactive reprioritization of spending helped limit the fiscal deficit to a projected 2.5 percent of GDP in 2020. Postponing unawarded contracts on non-core, non-World Cup related investment projects and savings in operating spending helped to mitigate the impact from the lower oil price and a slowdown in economic activity. The $10 billion international bond issuance in April attracted significant investors interest and allowed Qatar to preemptively cover its external financing needs.

“A gradual recovery—with real GDP growth projected at 2.7 percent in 2021—will be supported by increasing gas production and the rebound in domestic demand. Risks to the outlook are mainly driven by the global outlook and titled to the downside. They stem from uncertainty about the global growth recovery, success and speed of vaccination and pandemic resolution, and oil prices, whose outlook depends on the global recovery. Upside risks to the outlook arise from a successful resolution of the regional diplomatic rift and a stronger-than-envisaged global growth rebound.

“The 2021 budget projects a deficit of around 6 percent of GDP, maintaining support to the economy. According to the published extended budget statement, revenues are 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 are 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. As the recovery consolidates, the efforts to mobilize non-oil revenues and optimize expenditures should continue. A gradual fiscal consolidation would help preserve net public sector wealth.

“According to latest financial soundness indicators, the banking sector remains well-capitalized and liquid. While the moratorium on loan repayments provides an opportunity for banks and businesses to adjust to the new environment, the continued proactive monitoring of credit portfolio risks will support banks’ role in the economic recovery. We welcome the continued cooperation across financial sector regulators to strengthen the regulatory and supervisory frameworks.

“The ambitious structural reform agenda underpins Qatar’s economic diversification efforts to enhance long-term potential growth. The abolishment of the Kafala sponsorship system and strengthening labor protection are welcomed steps in facilitating labor mobility and spur productivity. These measures along with the new real estate and public-private partnerships (PPP) laws should help Qatar to improve its competitiveness. Reforms towards strengthening minority investors protection, contract enforcement, and insolvency resolution will further improve Qatar’s business environment, mobilize foreign direct investment, and support economic diversification.

“The team expresses its appreciation to the authorities for the open and productive discussions and for the arrangements made to facilitate this virtual visit. 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. We look forward to continuing the dialogue ahead of the 2021 Article IV Consultation.”