Core Views Qatar's short-term political risk profile remains among the most stable in the region. Despite enjoying little in the way of democratic freedom, Qataris benefit from massive hydrocarbon wealth, which is spread generously across the country's native population, and enjoy the highest per capita GDP in the world. A small population – and one without much inclination to protest against the government – will keep the country insulated from large-scale public unrest in the immediate term. The performance of the Qatari economy will be more mixed than in recent years, amid the intertwined pressures of the global energy slump and tightening domestic liquidity. We forecast real economic growth of 5.0% this year and 4.8% in 2017, driven mainly by strong growth in the primary and secondary sectors. Lower hydrocarbons prices do not present a significant threat to Qatar's fiscal sustainability.
Nevertheless, the government will seek to tighten control over public spending and rationalise Qatar's vast pipeline of infrastructure projects – a trend that will be positive for the economy over the longer run. We expect the Qatari Central Bank to maintain its policy lending rate on hold at 4.50% over the first half of the year, in a continued divergence from the US Federal Reserve's rate hike in December 2015. Deepening liquidity problems mean that more active steps to ease the strain on the domestic banking system are likely, including a cut in the repo rate and a reduction in the required reserve ratio. Qatar's decision to send 1,000 ground troops to Yemen – nearly 10% of its armed forces – marks a decisive milestone in the country's foreign policy. The move aligns Qatar more closely with its Gulf neighbours, but carries domestic risks and comes with little benefit.
Table Of Contents
Qatar Country Risk Report Q2 2016 Executive Summary 5 Core Views5 Key Risks5 Chapter 1: Economic Outlook 7 SWOT Analysis 7 BMI Economic Risk Index 7 Economic Growth Outlook 8 A More Mixed Performance8 The performance of the Qatari economy will be more mixed than in recent years, amid the intertwined pressures of the global energy slump and tightening domestic liquidity GDP By Expenditure Outlook 9 TABLE: GDP GROWTH FORECASTS10 TABLE: GOVERNMENT CONSUMPTION FORECASTS10 TABLE: PRIVATE CONSUMPTION FORECASTS10 TABLE: FIXED INVESTMENT FORECASTS11 TABLE: NET EXPORTS FORECASTS11 Monetary Policy 12 Liquidity Strains To Force Rate Divergence12 We expect the Qatari Central Bank to keep its policy lending rate on hold at 450% over the first half of the year, in a continued divergence from the Fed's rate hike in December 2015 Monetary Policy Framework 13 Monetary Policy II 14 Weaker Housing Market To Offset Impact Of Subsidy Cuts14 A weakening in residential rents and the continuing strength of the US dollar will help to offset the inflationary impact of the Qatari government's subsidy cuts Regional: Economic Analysis 15 MENA Credit Rating Downgrades: Not The Last15 SandP's wide-ranging downgrades of MENA oil exporters' credit ratings will further increase the pressure on the region's two weakest countries, Oman and Bahrain TABLE: GLOBAL - SandP'S FEBRUARY 17 RATING ACTIONS15 TABLE: KEY INDICATORS (2016 BMI FORECASTS)16 Chapter 2: 10-Year Forecast 17 The Qatari Economy To 2025 17 Solid Long-Term Growth Prospects17 The outlook for the Qatari economy over the next 10 years is positive, particularly given the positive outlook on the hydrocarbon sector and our view that the country will continue recording substantial current account surpluses TABLE: LONG-TERM MACROECONOMIC FORECASTS17 Chapter 3: Political Outlook 19 SWOT Analysis 19 BMI Political Risk Index 19 Domestic Politics 20 Emir's Position Firmly Secure20 A shift in Qatar's foreign policy, the erosion of vested interests at home, and the sidelining of older political figures - combined with the longrunning internal rivalries of the al-Thani family - could in theory threaten Qatari Emir Tamim bin Hamad al-Thani's grip on power TABLE: POLITICAL OVERVIEW20 TABLE: KEY MINISTERS FOLLOWING JANUARY 2016 CABINET RESHUFFLE21 Long-Term Political Outlook 22 Limited Challenges For The Coming Decade22 We find it hard to argue that political instability could become a core scenario in Qatar Nevertheless, with the government playing the role of conflict mediator in one of the hottest international conflict flashpoints in the world, in addition to having a growing young population and increasing number of expatriates, Qatar will not be immune to external and internal shocks in the long run Chapter 4: Operational Risk 25 SWOT Analysis 25 Operational Risk Index 25 Operational Risk 26 TABLE: OPERATIONAL RISK26 Trade Procedures And Governance 27 TABLE: MENA - TRADE PROCEDURES AND GOVERNANCE RISKS27 TABLE: EXPORT AND IMPORT DOCUMENTS28 TABLE: INTERNATIONAL TRADING BREAKDOWN28 Vulnerability To Crime 28 Chapter 5: BMI Global Macro Outlook 33 Global Macro Outlook 33 Tail Risks Mounting Amid Sub-Par Growth33 TABLE: GLOBAL ASSUMPTIONS33 TABLE: DEVELOPED STATES, REAL GDP GROWTH, %34 TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%) 34 TABLE: EMERGING MARKETS, REAL GDP GROWTH, %35 TABLE: MACROECONOMIC DATA and FORECASTS37