What is happening to the economy of Qatar?

Today I intend to take a look at the economy of one of the Gulf states Qatar. It hit the news earlier this month due to these events from Gulf News.

June 5: The UAE, Bahrain, Saudi Arabia, and Egypt cut diplomatic ties with Qatar, accusing Doha of supporting extremism, and giving the countries’ diplomats 48 hours to leave.

June 6: WAM, the UAE state news agency, announces that the country has closed its seaports, as well as its airspace, to all Qatari vessels and airplanes.

So it went into the bad boy/girl camp as diplomatic and economic sanctions were applied. Although in the topsy-turvy world in which we live this happened soon after.

Qatar will sign a deal to buy as many as 36 F-15 jets from the U.S. as the two countries navigate tensions over President Donald Trump’s backing for a Saudi-led coalition’s move to isolate the country for supporting terrorism.

Qatari Defense Minister Khalid Al-Attiyah and his U.S. counterpart, Jim Mattis, completed the $12 billion agreement on Wednesday in Washington, according to the Pentagon.

The sale “will give Qatar a state of the art capability and increase security cooperation and interoperability between the United States and Qatar,” the Defense Department said in a statement.

I do not know about you but if I thought that someone was indeed sponsoring terrorism I would not be selling them fighter jets! Still I suppose it does help achieve one of the Donald’s main aims which is to boost US manufacturing.

Also whilst we are on the subject of “Madness, they call it madness” there was of course the decision to award the 2022 football World Cup to a country with extraordinarily high temperatures. Also one could hardly claim that football was coming home!

How was the Qatari economy doing?

There was a time when it was party, party, party. From the Financial Times.

ministers used to boast about the economy expanding at one of the fastest rates in the world: in the decade to 2016, growth averaged 13 per cent.

Much of this was of course due to higher prices for crude oil and associated products which then changed.

The oil crash in 2014 hastened a spending review, with budget cuts and widespread redundancies across the energy and government sectors, including thousands at the state petroleum group. Jobs have been cut in museums and across education, media and health, with many projects cancelled or delayed.

There was something of a familiar feature to this.

In the West Bay business district, the impact of shrinking corporate and residential demand is stark. The flagship development boomed from 2004 to 2014 but the area is now littered with unoccupied and half-built skyscrapers.

The World Cup Boomlet

Work on this has turned out to be anti-cyclical and has provided a boost.

The Gulf state is building nine sports stadiums, “cooled” fan zones, hotels, sewage works and roads ahead of the football tournament……the government is spending $500m a week on World Cup-related infrastructure.

However there was a consequence.

Qatar, the world’s top exporter of liquefied natural gas, recorded its first budget deficit in 15 years in 2016 — a $12bn financing gap


This and its related products are the driver of the economy as OPEC notes.

Oil and natural gas account for about 55 per cent of the country’s gross domestic product. Petroleum has made Qatar one of the world’s fastest-growing and highest per-capita income countries.

There are various different measures but Global Finance puts it as the world’s highest per capita GDP in 2016. Of course this wealth mostly simply emerges from the ground mostly in the form of natural gas.

Of course the fact that the price of a barrel of Brent Crude Oil has fallen below US $45 is not welcome in Qatar as it reduces GDP, exports and government revenue. Also since May the price of natural gas has been falling with the NYMEX future dropping from US $3.42 to US $2.89. So bad times on both fronts as Qatar mulls the impact of the US shale oil producers.

Monetary Policy

You might have been wondering why there have not been reports of a crashing Qatari Rial. That is because of this. From the Qatar Central Bank.

QCB has adopted the exchange rate policy of its predecessor, Qatar Monetary Agency, through fixing the value of the Qatari Riyal (QR) against the US dollar (USD) at a rate of QR 3.64 per USD as a nominal anchor for its monetary policy.

So we have a type of fixed exchange rate or if you prefer a currency peg. This means that monetary policy is in effect imported from the United States which led to this.

Qatar Central Bank has decided to raise its QMR Deposit rate (QMRD) on Thursday June 15,2017 By 25 basis point from 1.25% to 1.50% .

Even in these times of low interest-rates one of 1.5% is hardly going to cut it in terms of currency support so minds immediately turn to the foreign exchange reserves. The QCB had 125.4 billion Riyals at the end of April. This was down on the recent peak of 158.3 billion Riyals of July 2015 presumably due to responses to the lower oil price. This meant that a balance of payments current account surplus of 50.1 billion Riyals of 2015 became a 30.3 billion deficit in 2016.

At a time like this people will also note that the external debt of the Qatari government rose from 73.4 billion Rials at the end of 2105 to 116.2 billion at the end of 2016. Also the banking sector has become more dependent on foreign cash according to Reuters.

Qatar’s banks became dependent on foreign funding during the last few years of strong economic growth. Their foreign liabilities increased to 451 billion riyals (97.90 billion pounds) in March from 310 billion riyals at the end of 2015.

Also if we look back to the 13th of this month I noticed this in the statement from the QCB saying that the banking sector was operating normally, which of course usually means it isn’t!

that QCB has sufficient foreign currencies reserves to meet all requirements.

So presumably it has been using them.

Qatar Investment Authority

The QIA manages a portfolio estimated at around US $335 billion and at a time like this investing abroad will look rather clever in foreign currency terms. Although the exact list may not be entirely inspiring.

Main assets include Volkswagen, Barclays, Canary Wharf, Harrods, Credit Suisse, Heathrow, Glencore, Tiffany & Co., Total.

There is speculation that there is pressure to use these assets. From Reuters.

Qatar’s sovereign wealth fund has transferred over $30 billion worth of its domestic equity holdings to the finance ministry and may sell other assets as part of a restructuring drive, people familiar with the matter told Reuters.

As someone who cycled past one of those assets – Chelsea Barracks –  only yesterday that provides food for thought for the London property market I think.


The discussion so far has been about financial issues so let us look at a real economy one which could not be more Arabic.

Saudi blockade on Qatar sabotages multi-billion dollar camel ……….A rescue mission is underway in Qatar after thousands of camels were expelled from Saudi Arabia due to the ongoing blockade. each of them can be worth up to $75,000  ( Al Jazeera )

Also food is being sent from Turkey.

Turkey is sending food supplies to Qatar by sea on Wednesday to compensate for a recent embargo by Qatar’s neighbour states, according to Turkey’s economy minister. (Al Jazeera )

At least it is better than sending soldiers which is unlikely to improve anything. But if we move back to the financial impact we wait to see how much has been spent to support the currency. We can see from the forward rates that there must have been some and maybe a lot. Also is it a coincidence that the UK looks to be taking the investment in Barclays to court? On that subject this from The Spectator is quite extraordinary.

Why I’m sad to see Barclays in the dock, and astonished to see John Varley there

Apparently he should not be there because he was “impeccably well tailored and mannered, who always looked destined for the top — but was also universally liked by his colleagues” something which could have come straight from the satire and comedy about “nice chaps” in Yes Prime Minister.

Meanwhile with the UK weather and the subject of today it is time for some Glenn Frey.

The heat is on (yeah) the heat is on, the heat is on
(Burning, burning, burning)
It’s on the street, the heat is on

Me on TipTV Finance



16 thoughts on “What is happening to the economy of Qatar?

  1. Hi Shaun
    A couple of comments
    1. You don’t get many fighter planes for a billion…
    2. The shock in the city about Varley is no surprise to those of us who read Private Eye and its city pages, from which it is quite clear that laws are only for little people and not for those nice chaps at the top
    The real surprise is that the SFO is going for such famous and senior people. I would not hold your breath for a conviction. There are already arguments that, if Barclays pleads guilty as a company, then the agreeable chaos can’t have a fair trial. If that holds true, then it will absolutely prove that, however much guilt there is, no one is to blame

    • Hi James

      I agree entirely and your reply reminded of a Yes Prime Minister episode so enjoy. The scene is in a City restaurant.

      Sir Humphrey Appleby ” So the ideal is a firm that is honest and clever?”

      Desmond Glazebook ( chairman of Bartlets Bank) “Let me know if you ever come across one won’t you”

  2. Shaun , A great interview on TIP TV – how I wish that it was a main terrestrial channel and watched by the masses. Lets hope some of the ‘economic reporters’ listen and take note so that we get less off the Brexit / inflation theories and more of the maxed out unsecured debt / drop in savings stories to account for economic slowdown. We have discussed car loans before in the comments section and I have mentioned the ‘trading up’ in car purchase that occurs when you don’t have to find the cash upfront. In other words people ‘buy’ a Range Rover when they can only really afford a Mondeo. Well I have two new examples of this right near where I live. A brand new Audi and a Jaguar just ‘bought’ by people that I know would not normally be able to afford them. The Audi owner is trying to sell their house and downsize to release cash. The Jaguar owner recently took out a loan to finance a future extended trip to visit relatives in Australia. This is not financial prudence! Or am I just old fashioned? Multiply this across the country and we are sitting on a financial time bomb – and if rates go up? Boom!!

    • Pavlaki,
      But they are relying on Mark Carney never putting up rates,and of course he never will,so in addition to all the mis-allocation of capital(maxed out credit cards/overextended house buyers/over extended car buyers/over extended house owners using their homes as cash machines for extensions/home improvements or university fees,holidays,second properties) there will be another two years of this added to what has already built up to be the biggest most dangerous bubble in the history of the country.
      When it collapses, it will be epic, but you can be sure the banks and more importantly the Bank of England will never be blamed by the mainstream media.

      • I agree with what you are saying but events may determine otherwise. If there is a run on the pound or a similar black swan event then rates may well have to rise. It is disgraceful that TPTB have allowed this situation to develop – its not as if there weren’t voices warning of the consequences of emergency rates that have just gone on and on. Central bankers the world over have lost their credibility as they have engaged in a race to the bottom with rates, exchange rate policy and support for assets. Collective madness.

        • Pavlaki,
          The problem is that there is along history of currency collapses that show that when the initial slide does take place the pattern is always the same, the central bank does nothing – then the slide continues but at a much faster pace, then they eventually wake up and do a small token increase, but the slide merely accelerates.

          Carney will not raise rates, he will only start to raise rates when the “waterfall” pattern shows on charts, and by then it will be too late, nobody will want to hold sterling and will sell it at any price to get out, the rate rises will follow but they will not work, they will always be too little too late, as the damage has already been done by the arrogance of Carney during the period we are currently in.

          The reason nobody will stop him is that the government is infected with the same arrogance and complacency that has led Carney to believe his own publicity as a “rock star” central banker, and when the blame game finally begins, the government will wash their hands and say it was the Bank of England “wot dunnit” as they gave them independence and control over interest rates.

          This fiasco may turn out to be just the coincidence of incompetence and arrogance over malice but I rather believe that events that result in such massive damage to a country’s economy and currency require much more planning and effort that can be explained away by mere coincidence, this has been decades in planning, and will eventually result in us being forced to accept the Euro and rejoin the EU, pretty tin foil hat stuff, I may be completely wrong, but the madness of the policies pursued by the government and the Bank of England over the years, to me suggest there is another group of people behind the scenes dictating policy that will inevitably result in the scenario described above.

      • and it will of course , be a big Surprise them all …..

        well there’s nowt you can do

        room on the sofa and some popcorn , kevin. It’s gonna be quite a show !


  3. ” Why I’m sad to see Barclays in the dock, and astonished to see John Varley there”

    Apparently he should not be there because he was “impeccably well tailored and mannered, who always looked destined for the top — but was also universally liked by his colleagues”

    was that because John offered a lucrative top job position and now thats scuppered?


    • Hi Forbin

      Never underestimate the ability of the media to act in an incestuous fashion. As I have replied to James it could be straight out of Yes Prime Minister.

      If we move to camels my mention of the price has led him to swamp my inbox with emails so I may end up regretting ever mentioning it!

  4. From what I remember of “Kim Philby – His Most Intimate Betrayal” an amazing documentary by Ben Macintyre, during the recruitment process used by MI5 to vet Philby, more or less the same language was used.

  5. Shaun, Qatar recent issues are all about the pipeline. Oil & Gas are in a price slump and the sure way to ensure profit is to lower distribution costs. Pipeline I guess is 10% of the cost of those ship things. Of course there are monopoly supplies to be broken to Europe. Would Russia like that? Hello no. Then there are certain US citizens who are friendly with Israel and have their own exploitation resource finds and local land stakes that need to to move the product. The Qatar difficulties are all about who is in or out of the latest pipeline traverse. The terrorist cover is a useful excuse to go throwing bombs, more people get killed in the UK due to poor building regulations.


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