Qatar’s economy back on track, but austerity drive to continue, says Finance Minister

Qatar’s economy, which had suffered a little due to lower oil prices, is firmly back on track, Finance Minister HE Ali Sherif Al Emadi said.

He said that the pressure on Qatar’s state finances was easing and the government may not issue any international bonds this year. However, he also said that they would continue to seek ways to save money.

“We may not issue a bond this year given where oil prices are. Right now, we’re close to break-even,” Gulf Times quoted him as saying.

Qatar's last international bond issue was a $9bn sale in May, 2016. While another issue is an option in the 2017 budget, no decision has been made about exercising it.

Qatar's 2017 budget, announced in mid-December, projected its deficit would shrink to QR28.3bn from QR46.5bn planned for 2016. Since the 2017 budget assumed an average oil price of about $45, the deficit is now close to disappearing, the minister said.

However, he made clear that the austerity drive would continue. The 2017 budget envisages spending to drop to QR198.4bn, 2% lower than the 2016 plan, because of a 9% cut in government operating expenses and a 1.5% fall in the total salary bill.

For the sake of fiscal discipline, Qatar will not use assets from its sovereign wealth fund to fund its deficit, and the government is scaling back state projects which it thinks the private sector can handle instead, he said.

In the past 18 months, between $8bn and $9bn of such projects were given to the private sector, the minister added without elaborating.

Al Emadi said the government was spending close to $500mn a week on capital projects, focusing on preparations to host the 2022 FIFA World Cup.

A total of 90% of World Cup projects have been awarded and two-thirds of them will be delivered in the next 24 months, he said.

He predicted Qatar's economy would grow 3.4 or 3.5% this year. It will face a drag in 2018 when Qatar, along with other countries in the region, introduces a value-added tax to boost non-oil revenues; al-Emadi estimated the tax would absorb between 1 and 2% of gross domestic product.