Press Release No. 23/161

IMF Staff Concludes Staff Visit with Qatar

May 18, 2023

• A decade of the nation’s plan to diversify the economy culminated into the successful hosting of the 2022 FIFA World Cup, with very strong growth registered in the year.
• After the World Cup, the economy is expected to normalize in the near term, while remaining robust. Despite global headwinds, Qatar’s near- to medium-term outlook is relatively favorable supported by the ongoing LNG expansion and sustained domestic demand.
• Broad fiscal discipline amid large hydrocarbon windfalls resulted in a significant fiscal surplus in 2022 and a sizeable reduction of the central government debt ratio.
• As domestic monetary policy has tightened, consistent with the currency peg to the U.S. dollar, banks’ asset quality, liquidity and profitability remained solid, and their reliance on nonresident deposits has fallen.
• The ambitious structural reform agenda underpins Qatar’s economic diversification efforts to build a more inclusive, knowledge-based and greener economy.

Washington, DC: An International Monetary Fund (IMF) team, led by Ms. Ran Bi, visited Doha during May 2–11, 2023, to gather facts on recent economic and financial sector developments, and the authorities’ policy actions and plans. At the end of the visit, Ms. Bi issued the following statement:

“A decade of the nation’s efforts to diversify the economy culminated in the successful hosting of the 2022 FIFA World Cup. Qatar managed the COVID-19 pandemic well, providing a safe environment for the first major global sport event since the pandemic. Qatar is well placed to leverage the top-notch infrastructure built and capitalize on the momentum and visibility created by the World Cup as the government lays out its 3 ^rd National Development Strategy to help achieve the ambitions of Qatar National Vision 2030.

“Qatar has smoothly navigated the recent global economic and market volatility. The Russian war in Ukraine highlighted risks from geopolitical tensions, including the impact on energy prices, and the role of natural gas in safeguarding energy security, opening up opportunities for Qatar. The banking sector turmoil originating from the U.S. has had only a limited and temporary impact on the domestic financial system.

“After very strong growth in 2022 boosted by the World Cup, the economy is expected to normalize in the near term while the outlook remains relatively favorable. Real GDP growth is expected at 2–2½ percent in 2023–24 on robust domestic demand and the ongoing LNG expansion, with inflation moderating gradually to around 3 percent. Medium-term growth is likely to rise to around 4–4½ percent after the North Field expansion starts boosting LNG production. Aided by buoyant export revenue and public spending, the fiscal and external current accounts are projected be in surpluses throughout the medium term.

“Risks to the outlook are broadly balanced. Downside risks stem mainly from an unfavorable global environment, including a sharper-than-expected global growth slowdown, tighter and more volatile global financial conditions, increased commodity price volatility, and further worsening of geopolitical tensions. On the upside, accelerated reform efforts guided by the 3 ^rd National Development Strategy, to be unveiled in the summer of 2023, could boost productivity and promote economic diversification. Sustained high hydrocarbon prices would further strengthen the outlook.

“Fiscal discipline has been broadly maintained in 2022, with most of the hydrocarbon windfalls saved and overall expenditure largely kept within the budget envelope. As a result, fiscal surplus rose to around 10 percent of GDP in 2022, from close to zero in 2021. Central government debt declined by 16 percentage points to around 42 percent of GDP during the same period. The 2023 budget balances continued discipline and sustaining domestic demand, with a broadly unchanged wage bill and cuts in public investment from 2022 outturns. The upcoming medium-term budget, for 2023–25, will be developed following the release of the 3 ^rd National Development Strategy to balance aspiration for transformation and fiscal discipline.

“The QCB has maintained price and financial stability. Monetary policy has been tightened broadly following the U.S. Federal Reserve, consistent with the currency peg to the U.S. dollar. Monetary policy transmission has strengthened through more effective liquidity management. Banks remain well-capitalized, liquid and profitable, although the non-performing loans (NPLs) ratio has edged up amid monetary policy tightening. Relatively high provisioning for NPLs, on the other hand, mitigates the risk. Qatar’s AML/CFT mutual evaluation, completed in February 2023, confirmed that the nation has made significant progress on technical compliance with the FATF Standards, while more work is needed to further improve the effectiveness.

“Banks’ reliance on non-resident deposits has progressively fallen by more than one-third (nearly US$30 billion) since their peak registered in late-2021. The completion of World Cup-related projects and hydrocarbon windfalls have reduced credit demand from the public sector and provided additional liquidity to banks, reducing their funding needs. The QCB has implemented several macroprudential measures since the Spring of 2022 to discourage banks from relying on non-resident deposits, especially of short tenors.

“Structural reforms have advanced further to achieve Qatar National Vision 2030, including in green financing and digitalization. The Ministry of Finance has developed a Sovereign Green Financing Framework with a clear set of principles. The QCB has created a dedicated department to define the ESG policies, standard reporting framework and management of ESG risk and compliance. Related initiatives at the national level involving main regulatory bodies are being assessed. Qatar has also successfully capitalized on the 2022 FIFA World Cup to upgrade its digital infrastructure. The Investment Promotion Agency of Qatar embarked on partnerships to accelerate digital transformation and foster technological innovation domestically, including through FDI. The QCB recently launched the National Fintech Strategy, with detailed guidelines and standards under development.

“The team expresses its appreciation to the authorities for the open and productive discussions and for the arrangements made to facilitate the visit. The team met with Minister of Finance H.E. Ali bin Ahmed al Kuwari, Governor of the Qatar Central Bank H.E. Sheikh Bandar Bin Mohammed Bin Saoud Al-Thani, other senior government officials, and private sector representatives. We look forward to continuing the dialogue ahead of the 2023 Article IV Consultation.”