Qatar’s Real GDP Growth Likely Around 2% in 2024-25

Post 2022 FIFA World Cup, Qatar’s growth normalisation continued with signs of strengthening activities more recently, the International Monetary Fund (IMF) said.

The IMF Executive Board, which concluded the 2024 Article IV Consultation with Qatar on January 27, said that the real GDP growth was projected to improve gradually to 2% in 2024–25 supported by public investment, spill-overs from the ongoing LNG expansion project, and strong tourism.

Medium-term growth is expected to accelerate to 4.75% on average, boosted by the significant LNG production expansion and initial gains from implementing reforms guided by the Third National Development Strategy (NDS3). Headline inflation will likely ease to 1% in 2024 and converge to around 2% over the medium term.

With lower hydrocarbon prices, both the current account and fiscal surpluses narrowed in 2023, to 17% of GDP and 5.5% of GDP, respectively as the twin surpluses moderated further in 2024. Over the medium, as Qatar’s LNG production expands massively, both the current and fiscal accounts will likely remain in surpluses, albeit declining as a share of GDP, as hydrocarbon prices are projected to fall.

The IMF also said that the banks were well-capitalised, liquid, and profitable, with the capital adequacy ratio of close to 20% and return on equity of 14.5%, respectively, in the third quarter of 2024.

Since the implementation of QCB measures to reduce banks’ net short-term foreign liabilities, banks’ non-resident deposits declined significantly, and banks have lengthened the average maturity and diversified further the sources of foreign funding.

The sector-wide NPL ratio remained broadly unchanged at slightly below 4 percent and the provisioning coverage ratio is relatively high at above 80%.

Qatar started implementing NDS3 to build a more diversified, knowledge-based and private sector-driven economy. Guided by NDS3, reform momentum has strengthened significantly, including to attract and retain high-skilled expatriate workers, foster innovation, promote public-private partnerships, and further improve the business efficiency.

Risks Broadly Balanced

Risks to the outlook are broadly balanced. Main downside risks stem from the global headwinds, including a sharper-than-expected global growth slowdown, increased volatility in global financial conditions and commodity prices, and further worsening of geopolitical tensions.

The regional conflict has had limited impact on Qatar but adds further to the downside risks through lower tourism and capital inflows, and more volatile hydrocarbon prices. Domestic downside risk stems mainly from further weaknesses in the real estate sector, although strong tourism and policy measures introduced in 2023 could mitigate the risk.

Over the medium and long term, supply in the global natural gas market is expected to expand significantly, potentially putting downward pressure on prices. On the upside, sustained high hydrocarbon prices and accelerated NDS3 reforms would strengthen the outlook.

However, if ambitious NDS3 initiatives lead to resource misallocation, both the public finance and growth prospect would be affected, the IMF cautioned.

Executive Board Assessment

The Executive Directors welcomed Qatar’s continued resilience to external shocks and its favourable medium-term outlook, driven by significant increases in LNG production and the reforms under the NDS3.

They have also agreed that maintaining prudent macroeconomic policies and accelerating reform efforts would further solidify macroeconomic stability and resilience to shocks while boosting prosperity.

Lauding Qatar’s commitment to continued fiscal prudence and called for accelerating fiscal reforms, they recommended adopting a medium-term fiscal anchor to help ensure intergenerational equity, and reiterated the need to accelerate revenue diversification, particularly by introducing the value-added tax.

They also highlighted the importance of improving spending efficiency and composition, particularly by enhancing public investment management. They welcomed the ongoing efforts to strengthen fiscal institutions and adopt a full-fledged medium-term fiscal framework with enhanced fiscal risk management.