- Basic data
- Public finances and the state budget
- Banking system
- Tax system
The lifting of the boycott imposed on Qatar and the introduction of a vaccine against the coronavirus provides new impetus to the Qatari economy in 2021. After a real year-on-year GDP decline of 3.7% in 2020 (which is Qatar’s deepest drop in history), the EIU predicts a recovery in real GDP growth of 2.9% in 2021. The economy is growing mainly due to the growth of global demand for LNG, as well as the recovery of the world economy. A gradual easing of restrictions against pandemic measures is planned in June/July. Hand in hand with vaccination of the population from the second half of 2021, the economy will benefit from the benefits of hosting the World Cup in football in 2022, which will also boost tourism. Year-on-year real GDP growth is expected to reach 4.5%. The energy sector will benefit from rising oil prices and higher output as demand recovers. After the effects of the coronavirus have subsided, the tourism and services sector will revive again. Investor confidence is expected to strengthen following the reconciliation with the Arab Quartet. After 2023, the EIU predicts stabilization of year-on-year GDP growth at around 3.1%.
According to cheeroutdoor.com, revenues from the export of natural gas mainly contribute to the formation of GDP, the service sector also has a relatively large share. The prospect of an increasing share of the agricultural sector as a result of the introduction of own production after the negative experience with the reduction of supplies during the embargo and pandemic period is interesting.
After two years of deflation, which was caused by a decline in economic activities and low prices on the world energy market, consumer prices and an inflation rate of around 0.5% are expected to rise in 2021, driven mainly by household and private sector consumption in the second half of the year. In 2022, the effect of the planned introduction of a five percent VAT rate and the growth in demand due to the holding of the FIFA World Cup should be added to these factors. The inflation rate should thus reach 3% next year and stabilize around 2% in 2023-25. The unemployment rate has slightly increased due to the pandemic, but will continue to be close to zero.
Thanks to its mineral wealth, despite the growing diversification of the economy, Qatar is heavily dependent on income from natural gas exports. Revenues from the sale of oil and natural gas (LNG) traditionally account for 70% of budget revenues, account for 90% of exports and account for roughly 60% of Qatar’s GDP. Despite short-term fluctuations caused mainly by fluctuations in the prices of these commodities on world exchanges, Qatar has accumulated capital, which it invests in domestic and foreign assets for the long term. The custodian of the reserve assets, which are estimated at more than 150% of GDP, is the Qatar Investment Authority (QIA), the state sovereign wealth fund, which invests the funds through its subsidiary Qatar Holding. Due to the future expected falling demand, it invests in renewable sources, new technologies and hydrogen.
|GDP growth (%)||1.2||0.8||-3.7||2.9||4.5|
|GDP/population (USD/PPP)||93 185||94,029.7||91,390||93,490||97,900|
|Export of goods (billion USD)||84.3||72.9||53.4||64.7||68.6|
|Import of goods (billion USD)||33.3||31.4||25.8||29.0||31.2|
|Trade Balance (Billion USD)||51.0||41.6||27.6||35.7||37.4|
|Industrial production (% change)||ON||ON||– 1.7||5.0||3.6|
|OECD export risk||3/7||3/7||3/7||3/7||ON|
Source: EIU, OECD, WEF
Public finance and state budget
|State budget balance (% of GDP)||-0.4|
|Public debt (% of GDP)||76.1|
|Current account balance (billion USD)||5.1|
|VAT (from 2022)||5%|
In 2021, budget expenditures will continue to aim at mitigating the economic impacts of the Covid-19 pandemic. Qatar will continue to rely heavily on hydrocarbon revenues, which will largely track oil price movements. The recent strengthening of global oil prices has positively changed the fiscal outlook, with average oil prices expected to rise by 56% to $66 per barrel in 2021. This will give the government room to increase spending (especially capital items) compared to the original spending target for 2021 of USD 5billion. Fiscal revenues are expected to increase in 2021 and the budget will swing to a surplus of 0.1% of GDP (from a deficit of 2.1% of GDP in 2020).
The economy is set to grow in 2022-25. The 2022 FIFA World Cup and the expected introduction of a five percent value added tax (VAT) will also have a positive impact on revenues for the state budget. The fiscal surplus is expected to reach 3.8% of GDP in 2022 after the World Cup, which will contribute to higher tax collections and stronger economic growth. The surplus will decline to 2.1% of GDP in 2023-24, down to 1% of GDP in 2025, due to an expected 9% decline in world average oil prices.
The country’s banking sector is extremely developed and consists of 17 banks, 9 of which are Qatari-owned. The Qatar Central Bank, established in 1993 on the basis of the Qatar Monetary Agency, determines the country’s banking and monetary policy. At the time of the coronavirus pandemic, it reduced the base interest rate to 2.5%. The most important banks in Qatar are Qatar National Bank, Commercial Bank, Doha Bank, Qatar Islamic Bank, Iternational Islamic, Al Khaliji, from foreign banks HSBC (UK), Arab Bank Ltd. (Jordan), Mashreq Bank Ltd. (UAE) Standard Chartered Bank (UK), BNP Paribas (France), Bank Saderat (Iran), United Bank (Pakistan). Qatar Industrial Development Bank was established in 1997 and is a specialized, state-owned institution financing small and medium-sized enterprises. According to the Investment Act no. 13 of 2000 (and its amendments of January 2019) foreign capital is still prohibited from doing business in the banking, insurance and business services sectors, however the government has created the Qatar Financial Center institution, which overcomes this obstacle and can also be used to establish a new foreign bank. Existing foreign banks were established in Qatar even before Qatar’s independence in 1971.
Qatar has no income tax, no VAT, no road tax (yet), no consumption taxes (except for alcohol, sugary drinks and tobacco) and no health and social insurance. Qatar has a corporate income tax (Corporate Tax) which ranges from 10% to 35%. Profit tax has a number of exceptions, e.g. businesses established as direct foreign investments are exempt from it. In an effort to attract foreign capital, Qatar provides favorable conditions for the inflow of foreign investment – cheap gas, electricity, land rent, duty-free imports of business equipment, duty-free exports, but also zero taxes on profits for a certain pre-approved period (exception is granted for a period of 5- 10 years), salaries of foreigners – natural persons are also not taxed. At the level of the Gulf Cooperation Council (GCC), the plan to impose a VAT of 5% in the GCC member states was agreed. The introduction of five percent VAT in Qatar is planned for 2022.