Qatar Country Risk Report Q2 2016

Qatar Country Risk Report Q2 2016

Core Views Qatar's short-term political risk profile remains among the most stable in the region. Despite enjoying little in the way of democratic freedom, Qataris benefit from massive hydrocarbon wealth, which is spread generously across the country's native population, and enjoy the highest per capita GDP in the world. A small population – and one without much inclination to protest against the government – will keep the country insulated from large-scale public unrest in the immediate term. The performance of the Qatari economy will be more mixed than in recent years, amid the intertwined pressures of the global energy slump and tightening domestic liquidity. We forecast real economic growth of 5.0% this year and 4.8% in 2017, driven mainly by strong growth in the primary and secondary sectors. Lower hydrocarbons prices do not present a significant threat to Qatar's fiscal sustainability. Nevertheless, the government will seek to tighten control over public spending and rationalise Qatar's vast pipeline of infrastructure projects – a trend that will be positive for the economy over the longer run. We expect the Qatari Central Bank to maintain its policy lending rate on hold at 4.50% over the first half of the year, in a continued divergence from the US Federal Reserve's rate hike in December 2015. Deepening liquidity problems mean that more active steps to ease the strain on the domestic banking system are likely, including a cut in the repo rate and a reduction in the required reserve ratio. Qatar's decision to send 1,000 ground troops to Yemen – nearly 10% of its armed forces – marks a decisive milestone in the country's foreign policy. The move aligns Qatar more closely with its Gulf neighbours, but carries domestic risks and comes with little benefit.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
A More Mixed Performance
The performance of the Qatari economy will be more mixed than in recent years, amid the intertwined pressures of the global energy
slump and tightening domestic liquidity.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Liquidity Strains To Force Rate Divergence
We expect the Qatari Central Bank to keep its policy lending rate on hold at 4.50% over the first half of the year, in a continued
divergence from the Fed's rate hike in December 2015.
Monetary Policy Framework
Monetary Policy II
Weaker Housing Market To Offset Impact Of Subsidy Cuts
A weakening in residential rents and the continuing strength of the US dollar will help to offset the inflationary impact of the Qatari
government's subsidy cuts.
Regional: Economic Analysis
MENA Credit Rating Downgrades: Not The Last
S&P's wide-ranging downgrades of MENA oil exporters' credit ratings will further increase the pressure on the region's two weakest
countries, Oman and Bahrain.
TABLE: GLOBAL – S&P'S FEBRUARY 17 RATING ACTIONS
TABLE: KEY INDICATORS (2016 BMI FORECASTS)
Chapter 2: 10-Year Forecast
The Qatari Economy To 2025
Solid Long-Term Growth Prospects
The outlook for the Qatari economy over the next 10 years is positive, particularly given the positive outlook on the hydrocarbon sector
and our view that the country will continue recording substantial current account surpluses.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Emir's Position Firmly Secure
A shift in Qatar's foreign policy, the erosion of vested interests at home, and the sidelining of older political figures – combined with the longrunning
internal rivalries of the al-Thani family – could in theory threaten Qatari Emir Tamim bin Hamad al-Thani's grip on power.
TABLE: POLITICAL OVERVIEW
TABLE: KEY MINISTERS FOLLOWING JANUARY 2016 CABINET RESHUFFLE
Long-Term Political Outlook
Limited Challenges For The Coming Decade
We find it hard to argue that political instability could become a core scenario in Qatar. Nevertheless, with the government playing
the role of conflict mediator in one of the hottest international conflict flashpoints in the world, in addition to having a growing young
population and increasing number of expatriates, Qatar will not be immune to external and internal shocks in the long run.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: MENA – TRADE PROCEDURES AND GOVERNANCE RISKS
TABLE: EXPORT AND IMPORT DOCUMENTS
TABLE: INTERNATIONAL TRADING BREAKDOWN
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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