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Qatar’s Economy Stable Despite Gulf Crisis

Photo: The Peninsula

According to experts, the economy of Qatar is the most resilient in the Middle East and is strong enough to survive the crisis in the region.

The four Arab states imposed land, sea and air embargo on Qatar after accusing it of supporting terrorism, but it has not stopped Qatar from progressing as everything is falling in place. Qatar sealed a deal with Turkey and Iran to import food supplies.

“In the medium- to long-term, perhaps people who live here will feel” the effects, but for the time being, “we haven’t felt any big difference”, said Mohamed Ammar, who heads the Qatari Businessmen Association.

For Rashid bin Ali al-Mansoori, CEO of the Qatar Stock Exchange, the worst is already over. The second most highly-capitalised bourse in the Middle East plunged seven percent on June 5 and lost almost 10 percent in the first three days.

“We were surprised and the market also was surprised, so the market really reacted to the news like any other market of course,” he said.

But “the Qatar economy is very strong, it’s the strongest economy in the region… investor trust and confidence in the market is still there,” said Mansoori.

However, the level still remains six percent lower than during pre-crisis period. Amy McAlister of consultancy firm Oxford Economics said central bank data showed reserves were running at their lowest level since May 2012, a slide of 30 percent compared with June 2016.

“Uncertainty will have prompted banks and portfolio investment funds to withdraw money from Qatar, leading to a fall in reserves as the central bank tries to ease liquidity pressures,” she said.

“The central bank will have also depleted reserves to support the currency peg to the US dollar, which has seen pressure since the dispute began.”

Oxford Economics found out after the study of growth outlook for 2017, that it was 1.4 percent compared to 3.4 before the crisis, and re-evaluated inflation at 1.8 percent, up from the anticipated 1.5 percent, because of higher import costs.

But experts believe that Qatar can still hold on during the crisis without much effect.

“Qatar is the most resilient country in the Middle East by far,” said Andreas Krieg, a strategic risk analyst and assistant professor at King’s College London university.

“They are very determined to see this through. Unlike the other countries, they have the most stable economy and the most stable financial situation.

“The per capita reserves they have are the greatest in the world. Even if they have to liquidate some of their investments overseas, they could do but, at this point, this is not on the books,” he said.

It holds a staggering $330 billion in a sovereign wealth fund, with assets heavily invested abroad.

“It is worth pointing out that these reserves do not include the foreign assets of the sovereign wealth fund, so the wider impact may not be as significant as the sharp drop initially suggests,” said McAlistair.

For McAlistair, despite uncertainty over the timeframe of the crisis, “Qatar will likely be able to withstand economic sanctions for many years”.

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