Abstract
IMF Country Report No. 22/175
Copyright Page
IMF Country Report No. 22/175
QATAR
June 2022
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Qatar, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its May 27, 2022 consideration of the staff report that concluded the Article IV consultation with Qatar.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 27, 2022, following discussions that ended on March 1, 2022, with the officials of Qatar on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on May 13, 2022.
An Informational Annex prepared by the IMF staff.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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Press Release
PRESS RELEASE
PR22/213
IMF Executive Board Concludes 2022 Article IV Consultation with Qatar
FOR IMMEDIATE RELEASE
Washington, DC – June 21, 2022: On May 27, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Qatar.1
The authorities have responded swiftly and decisively to the COVID-19 crisis. Proactive containment measures, strong healthcare, fast vaccination rollout, and a comprehensive support package have helped to minimize the health and economic impact of the pandemic. The economic recovery is gaining strength, supported by the rebound in domestic demand, favorable hydrocarbon prices and the 2022 FIFA World Cup. Real GDP growth is expected to reach 3.4 percent in 2022, driven by non-hydrocarbon growth (at 4.1 percent). Medium-term growth outlook is buoyed by the North Field LNG expansion project. Headline inflation rose to 2.3 percent (period average) in 2021, driven by the strong recovery in domestic demand, especially for services, along with higher energy and food prices. As these trends continue, inflation is projected to increase to 3.5 percent in 2022, before declining over the medium term.
Higher hydrocarbon prices helped to strengthen both fiscal and current account positions from their 2020 troughs, bringing a fiscal surplus of 0.3 percent of GDP and a current account surplus of 14.7 percent of GDP in 2021. The fiscal and the current account surpluses are projected to widen further in 2022 to 5.4 percent and 20 percent of GDP, respectively. The LNG expansion project will support the fiscal and external balances over the medium term.
Banks remain well-capitalized and liquid, but financial risks have risen. By end-2021, Tier 1 capital ratio rose to 18 percent, while non-performing loans ratio inched up to 2.4 percent, although loans under moratoria were not subject to reclassification. The banking sector’s reliance on foreign funding increased to 39 percent of total liabilities (110 percent of GDP) by end-2021, but with prudential measures in place, it declined recently.
Structural reforms have accelerated since the pandemic. Qatar abolished Kafala—a sponsorship system for expatriate workers which constrains labor mobility —supplemented by mandatory minimum wage and allowances for food and housing, a welcome first step to strengthen protection and flexibility for expatriate workers. A residency program has been introduced for real estate investment, full foreign ownership of Qatari companies allowed to attract foreign capital, and a new PPP law adopted to boost private investment. Qatar also announced a climate strategy to reduce 25 percent of greenhouse gas emissions by 2030 and is accelerating efforts to promote and regulate the fintech sector.
Risks to the outlook are broadly balanced in the short run but tilted to the downside over the medium term.
Executive Board Assessment2
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their swift and decisive policy response to the COVID-19 pandemic and strong vaccination efforts that helped alleviate the impact of the crisis and facilitate a speedy recovery. The economic outlook is favorable, including due to the recovery in domestic demand, the 2022 FIFA World Cup, high hydrocarbon prices, and the major LNG expansion project. Nonetheless, the uncertain path of the pandemic, volatile hydrocarbon prices, tighter global financial conditions, and geopolitical tensions pose significant risks. In this context, Directors concurred on the need to strike a balance between supporting the recovery and avoiding procyclical policies and buildup of financial sector vulnerabilities. Accelerating structural reforms will also be critical to foster a transformational recovery and build climate resilience.
Directors called for continued fiscal prudence amid high hydrocarbon prices and agreed on the need for a gradual, growth-friendly fiscal consolidation over the medium term. They encouraged the authorities to diversify revenues, introduce the VAT, enhance current spending efficiency—including public employment and subsidy reforms—and reorient public spending to ensure inter-generational equity and promote diversification and growth. Directors also highlighted the need for a well-designed and operational medium-term fiscal framework with greater fiscal transparency.
Directors agreed that the pegged exchange rate regime remains a credible monetary anchor and continues to serve Qatar well, and will be further supported by fiscal consolidation and competitiveness-enhancing reforms. Steps to improve liquidity management, strengthen monetary transmission channels, and contain balance sheet vulnerabilities from FX exposure could further enhance the monetary policy framework.
Directors welcomed the gradual unwinding of financial sector support measures and the move toward a more targeted approach. They called for continued diligence in banking supervision and implementation of prudential measures to ensure financial stability.
Directors stressed the importance of adopting an adequate bank resolution framework and enhanced insolvency regime, deepening domestic financial market, and reducing the sovereign-bank nexus. They also supported the authorities’ efforts to develop an adequate fintech regulatory framework and further strengthen the AML/CFT framework.
Directors stressed the need to accelerate structural reforms and leverage global trends, such as digitalization and climate actions, to build a more inclusive, diversified, and greener economy. They welcomed reforms introduced during the pandemic, including to abolish the Kafala system, improve the business environment, and launch a comprehensive climate strategy. Directors encouraged further efforts to boost the mobility and safety nets for expatriates, incentivize private sector employment, enhance private sector competitiveness, and accelerate climate mitigation and adaptation. Increasing female labor participation and taking advantage of the existing female human capital will also help boost productivity.
Qatar: Selected Economic and Financial Indicators, 2019–2023
Includes crude oil, natural gas, propane, butane, and condensates.
Qatar: Selected Economic and Financial Indicators, 2019–2023
| (Quota: 735.1 million SDRs, 2021) (Per capita income: U.S.$ 68,581, 2021) (Life expectancy at birth: 80, 2020), (Population: 2.7 million, 2021) |
|||||
| Projections | |||||
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Production and prices | (change in percent unless otherwise noted) | ||||
| Real GDP (2018 prices) | 0.7 | -3.6 | 1.5 | 3.4 | 2.5 |
| Hydrocarbon 1/ | -1.7 | -2.0 | -0.3 | 2.3 | 1.9 |
| Nonhydrocarbon | 2.2 | -4.5 | 2.7 | 4.1 | 2.8 |
| CPI inflation (average) | -0.7 | -2.7 | 2.3 | 3.5 | 3.2 |
| Public finances | (percent of GDP unless otherwise noted) | ||||
| Revenue | 33.5 | 32.6 | 29.7 | 34.1 | 36.8 |
| Expenditure | 32.5 | 34.7 | 29.4 | 28.6 | 28.4 |
| Current | 19.3 | 22.0 | 18.3 | 19.2 | 19.2 |
| Capital | 13.1 | 12.7 | 11.1 | 9.4 | 9.2 |
| Central government fiscal balance | 1.0 | -2.1 | 0.3 | 5.4 | 8.5 |
| Money | (change in percent unless otherwise noted) | ||||
| Broad money | 2.5 | 3.8 | 1.4 | 16.9 | 8.2 |
| Credit to private sector | 19.5 | 8.3 | 9.5 | 7.4 | 8.7 |
| External sector | (percent of GDP unless otherwise noted) | ||||
| Exports | 52.2 | 49.1 | 58.8 | 64.6 | 58.5 |
| Imports | 37.9 | 40.9 | 34.1 | 33.1 | 33.3 |
| Current account balance (billions of U.S. dollars) | 4.3 | -2.9 | 26.4 | 44.9 | 34.5 |
| in percent of GDP | 2.4 | -2.0 | 14.7 | 19.9 | 15.1 |
| External debt | 137.6 | 187.0 | 161.5 | 131.5 | 133.3 |
| Central Bank's reserves | 22.5 | 28.3 | 23.5 | 31.3 | 36.3 |
| in months of next year’s imports | 8.0 | 8.0 | 6.6 | 10.9 | 12.1 |
| Exchange rate | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| Real effective exchange rate (change in percent) | 0.8 | -5.7 | 1.7 | … | … |
Includes crude oil, natural gas, propane, butane, and condensates.
Qatar: Selected Economic and Financial Indicators, 2019–2023
| (Quota: 735.1 million SDRs, 2021) (Per capita income: U.S.$ 68,581, 2021) (Life expectancy at birth: 80, 2020), (Population: 2.7 million, 2021) |
|||||
| Projections | |||||
| 2019 | 2020 | 2021 | 2022 | 2023 | |
| Production and prices | (change in percent unless otherwise noted) | ||||
| Real GDP (2018 prices) | 0.7 | -3.6 | 1.5 | 3.4 | 2.5 |
| Hydrocarbon 1/ | -1.7 | -2.0 | -0.3 | 2.3 | 1.9 |
| Nonhydrocarbon | 2.2 | -4.5 | 2.7 | 4.1 | 2.8 |
| CPI inflation (average) | -0.7 | -2.7 | 2.3 | 3.5 | 3.2 |
| Public finances | (percent of GDP unless otherwise noted) | ||||
| Revenue | 33.5 | 32.6 | 29.7 | 34.1 | 36.8 |
| Expenditure | 32.5 | 34.7 | 29.4 | 28.6 | 28.4 |
| Current | 19.3 | 22.0 | 18.3 | 19.2 | 19.2 |
| Capital | 13.1 | 12.7 | 11.1 | 9.4 | 9.2 |
| Central government fiscal balance | 1.0 | -2.1 | 0.3 | 5.4 | 8.5 |
| Money | (change in percent unless otherwise noted) | ||||
| Broad money | 2.5 | 3.8 | 1.4 | 16.9 | 8.2 |
| Credit to private sector | 19.5 | 8.3 | 9.5 | 7.4 | 8.7 |
| External sector | (percent of GDP unless otherwise noted) | ||||
| Exports | 52.2 | 49.1 | 58.8 | 64.6 | 58.5 |
| Imports | 37.9 | 40.9 | 34.1 | 33.1 | 33.3 |
| Current account balance (billions of U.S. dollars) | 4.3 | -2.9 | 26.4 | 44.9 | 34.5 |
| in percent of GDP | 2.4 | -2.0 | 14.7 | 19.9 | 15.1 |
| External debt | 137.6 | 187.0 | 161.5 | 131.5 | 133.3 |
| Central Bank's reserves | 22.5 | 28.3 | 23.5 | 31.3 | 36.3 |
| in months of next year’s imports | 8.0 | 8.0 | 6.6 | 10.9 | 12.1 |
| Exchange rate | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| Real effective exchange rate (change in percent) | 0.8 | -5.7 | 1.7 | … | … |
Includes crude oil, natural gas, propane, butane, and condensates.
Title Page
QATAR
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
May 13, 2022
KEY ISSUES
Context: Swift and decisive policy response to the Covid-19 pandemic has helped to mitigate the health and economic impact of the crisis. Fast vaccination rollout has also strengthened the economy’s resilience to new pandemic waves, paving the way for a speedy recovery. As the economy rebounds, a gradual exit from pandemic support measures is underway.
Outlook and risks: Near-term growth is set to accelerate in the run up to the 2022 FIFA World Cup, supported by the revival in domestic demand and high hydrocarbon prices. A major LNG expansion project will boost medium-term prospects and strengthen fiscal and external positions. A more protracted pandemic, oil market volatility, tighter global financial conditions, and worsening geopolitical tensions are main downside risks.
Financial sector policy: The gradual exit strategy and the move toward more targeted support are steps in the right direction. Diligent banking supervision is key to safeguard financial stability. An enhanced insolvency regime and adequate bank resolution framework should be in place to strengthen resilience and facilitate resource reallocation. More forceful implementation of prudential measures, domestic financial deepening and a reduced public sector footprint in the banking system will help alleviate banks’ exposure to foreign liabilities. Developing an adequate fintech regulatory framework would balance opportunities and risks.
Fiscal policy: Near-term priority is to maintain fiscal discipline amid high hydrocarbon prices. Favorable cyclical conditions also provide an opportunity to embark on a growth-friendly medium-term consolidation, including to: (i) diversify non-hydrocarbon revenues, especially to introduce the VAT, (ii) enhance the efficiency of current expenditure through public employment and subsidies reforms, and (iii) reorient public investment to promote diversification and growth. An enhanced medium-term fiscal framework and greater transparency would support policymaking and implementation.
Structural reforms: Accelerating structural reforms is critical to limit scarring from the pandemic and facilitate economic transformation. Reforms should focus on improving productivity and inclusion, enhancing private sector competitiveness, and leveraging global trends, such as digitalization and climate actions, to foster stronger and more diversified growth while addressing climate challenges.
Approved By
Zeine Zeidane and Andrea Schaechter
Discussions were held remotely during February 13–March 1, 2022. The staff team comprised Mmes. Bi (head) and Benmohamed, Mr. Bibolov (all MCD) and Mr. Vernon (FAD). Mmes. Al-Riffai and Merhi (OED) also joined mission meetings, and Mr. Mohieldin (ED) joined the concluding meetings. Ms. Zhang provided research assistance and Ms. George provided editorial support.
Contents
CONTEXT
RECENT MACROECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
POLICIES TO ENSURE STABILITY AND PROMOTE ECONOMIC TRANSFORMATION
A. Safeguarding Financial Stability amid a Gradual Exit
B. Maintaining Fiscal Prudence and Embarking on a Growth-friendly Consolidation
C. Strengthening the Monetary Policy Framework
D. Advancing Structural Reforms to Reduce Economic Scarring and Promote Diversification
STAFF APPRAISAL
BOXES
1. The North Field Expansion Project
2. Economic Impact of the 2022 FIFA World Cup and Spillovers to the GCC
FIGURES
1. COVID-19 Pandemic Selected Indicators
2. Real Sector Developments
3. External Sector Developments
4. Fiscal Sector Developments
5. Financial Sector Developments
TABLES
1. Selected Macroeconomic Indicators, 2019-27
2. Balance of Payments, 2018-27
3a. Summary of Central Government Finance, 2018-27 (billions of Qatari Riyals)
3b. Summary of Central Government Finance, 2018-27 (percent of GDP)
4. Monetary Survey, 2018-27
5. Financial Soundness Indicators, 2016-21
6. Vulnerability Indicators, 2016-21
ANNEXES
I. Implementation of the 2019 Article IV Recommendations
II. External Sector Assessment
III. External Debt Sustainability Analysis
IV. Public Sector Debt Sustainability Analysis
V. Risk Assessment Matrix
VI. A Fiscal Strategy to Promote Intergenerational Equity and Diversification
VII. Climate Risks and Actions in Qatar
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
