Measures imposed by some GCC and other states on 5 June following the diplomatic rift with some trading-partner countries led to a sharp contraction in imports into Qatar in June with a slight recovery in July but its non-oil growth is expected to slow to in 2017, the IMF said in a statement on 30 August.
“Efforts to diversify sources of imports and external financing and enhance domestic food processing are accelerating,” the IMF said. “As a result of the authorities’ quick response, some trade has been re-routed and alternative sources of food supply have been established, allaying fears of potential shortages. The initial concern that trade disruptions could impact the implementation of key infrastructure projects has also been mitigated by the availability of an inventory of construction materials and of alternative sources of imports.”
The IMF said non-oil growth will slow to 4.6 per cent in 2017 from 5.6 per cent in 2016, due to the ongoing fiscal consolidation and trade diversion.
“Over the medium term, non-hydrocarbon GDP growth is expected to reach 4.8 percent, as structural reforms are implemented,” the IMF said. “Headline inflation remains subdued at 0.8 per cent year-on-year-basis in June event though transport and food costs have edged up and delays caused by rerouting trade have raised operational costs for some businesses. Over the longer term, the diplomatic rift could weaken confidence and reduce investment and growth, both in Qatar and possibly in other GCC countries as well.”
“Fiscal consolidation is proceeding, underpinned by current expenditure cuts and an increase in non-oil revenues,” the IMF said. “The central government deficit is projected to decline to 5.9 per cent in 2017 from 8.8 per cent in 2016. The 2018 budget is expected to continue with gradual fiscal consolidation, focusing on the introduction of key tax policy and administration measures, including the introduction of a VAT and excises during the first half of 2018 and further rationalisation of recurrent expenditures. The current account position is projected to improve to a surplus of about 3.9 percent of GDP in 2017 from a deficit of 7.7 percent in 2016, on account of contraction in imports and recovery in oil prices.”
“In the aftermath of the diplomatic rift, banks’ liabilities to non-residents fell sharply,” the IMF said. “The impact on banks’ balance sheets was mitigated by liquidity injections by the Qatar Central Bank and increased public sector deposits. These reactions reflected effective coordination and collaboration among key government’s agencies. Qatar monetary authorities stand ready to meet any future withdrawal of non-resident deposits.”