Sanctions imposed on Doha by other countries in the region are taking a toll on Qatar’s economy, particularly its private sector, with the government scrambling to cushion the fallout from the crisis.
Despite denials that it is financially strained, Doha has announced measures designed to shore up its economy, including incentives to help foreign businesses and the expatriate community, which is a cornerstone of its economy.
Qatari Prime Minister Sheikh Abdullah bin Nasser bin Khalifa al-Thani ordered rent rates for companies in logistics zones cut 50% starting in 2018 and going into 2019, Qatar’s official news agency reported. The statement said new investors in those zones would be allowed to operate businesses rent-free for up to a year, provided they obtain building permits by specific deadlines.
Sheikh Abdullah also said the Qatar Development Bank, which provides start-up firms with financing options, would permit the delay of loan repayments for up to six months to ease matters for innovators.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed ties with Qatar on June 5 over what they described as Doha’s interference in their countries’ internal affairs and its support for radical groups, such as Hamas, the Taliban and the Muslim Brotherhood. The Qatari government denied the allegations.
In addition to cutting diplomatic ties, the Arab quartet imposed trade restrictions and ordered their citizens to leave Qatar, resulting in a slowdown in the tourism, trade and banking sectors.
The sanctions have affected the Qatari economy to such a degree that the government is rushing to raise funds through a bond sale. Government officials are in talks with banks and financial institutions to decide on the timing for the sale, with the bond likely to be valued approximately $9 billion, Bloomberg News reported.
The effect on Qatar’s finances has been severe. The Doha government injected approximately $40 billion — equivalent to 23% of its GDP — into its economy in the first two months of the crisis. The breakdown in relations has resulted in the outflow of approximately $7.5 billion in foreign customer deposits and a further $15 billion in foreign interbank deposits and borrowings, the Qatar Central Bank said.
Gulf investors have withdrawn deposits from Qatari banks and the Doha stock market. In the quartet of countries, Qatari-owned businesses have begun to close shop and sell assets.
Qatar’s economy was sluggish before the dispute erupted due to lower oil prices. Bloomberg News said the country’s GDP grew only 0.6% in the quarter ending June 30 from a year earlier.
This, coupled with Doha’s financially draining World Cup endeavour, which Qatari officials said is costing the country about $500 million a week, indicates things are not going to improve soon. Experts predicted the Qatari economy will expand 2.5% this year, its slowest growth since the mid-1990s.
Mohammed Alkhereiji is the Arab Weekly’s Gulf section editor.