coronavirus covid-19 update · anticipated as export earnings will be reduced amid a global...

Country Insight ReportQatarNovember 2020

Written 17 November 2020

Table of Contents

HIGH-LEVEL SUMMARYKey Headlines 3

Key Recommendations 4

Global Insight 5

Regional Insight 7

Country Insight Headlines 9

• Credit Environment Outlook 9

• Supply Environment Outlook 10

• Market Environment Outlook 11

• Political Environment Outlook 12

DETAILED ANALYSISShort-Term Economic Outlook 14

Long-Term Economic Potential 16

Market Potential 18

FX Risk 20

Transfer Risk 22

Business Regulatory Environment 24

Business Continuity 26

Political / Insecurity Risk 28

Expropriation / Nationalisation Risk 30

BACKGROUNDPerspectives 32

• The Economy 32

• Politics 36

• Commercial Culture 39

Statistical Reference 42

• Key Indicators and Forecasts 42

User Guide 43

Country Insight Report: QatarNovember 2020

© Dun & Bradstreet 2

OVERALL COUNTRY RISK RATING: DB2dLow risk: Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher volatility of returns in future.

Rating Outlook: Deteriorating

Rating History

Source: Dun & Bradstreet

Note: 1 = Low Risk, 7 = High Risk

KEY HEADLINES

CREDIT ENVIRONMENT OUTLOOK

Trend: Stable

A moratorium on loan repayments (part of the coronavirus support package) expired inSeptember, but there have been no signs of major distress in the business sector.Qatar National Bank, a bellwether for the banking sector, has reported a large declinein profits on higher loan loss provisions, as private-sector credit is curtailed.

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SUPPLY ENVIRONMENT OUTLOOK

Trend: Deteriorating

In April 2020, we downgraded the Supply Environment Outlook trend indicator to'deteriorating' on the back of the coronavirus pandemic.In June, the government began a four-phase lifting of coronavirus restrictions, relievingsome of the internal logistical challenges.Saudi Arabia, UAE, Bahrain and Egypt continue to keep their trade boycott in place,which complicates pan-Gulf Co-operation Council (GCC) distribution.

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MARKET ENVIRONMENT OUTLOOK


In April 2020, we downgraded the Market Environment Outlook RAG status to Amberand the trend indicator to 'deteriorating' on the back of the coronavirus.In June, the government passed a long-awaited public-private partnership (PPP) law,which could create opportunities for foreign investors.The crash in oil prices and associated government spending cuts, as well as thelockdown, have pushed the non-oil sector into its first contraction in decades.

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POLITICAL ENVIRONMENT OUTLOOK

Trend: Stable

The emir announced that Shura (Legislative) Council elections would be held inOctober 2021, pointing to greater political participation.Qatar's strong alignment with Turkey, especially on Libya, continues to provoke theboycotting countries, which view Turkey’s regional ambitions with suspicion.

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KEY RECOMMENDATIONS

Track announcements related to the phased reopening of the economy, as coronavirusinfections are gradually brought under control.Monitor the level of coronavirus infections for an upswing that may result in renewedrestrictions on movement.Look for government announcements on new tenders under the recently enacted PPPlaw.Be aware that some international banks remain wary of doing business in Qatar for fearof being penalised by Saudi Arabia and the UAE, in view of their boycott of Qatar.Be prepared for the boycott to remain in place long term, including when makingstaffing and investment decisions.However, also plan for potential opportunities should the boycott be suddenly lifted.Consider financing opportunities through banks located in the Qatar Financial Centrefree zone, which has strong court and arbitration mechanisms.Look for opportunities for improved logistics management in the new free zones closeto the main port and airport.Monitor the progress of new legislation, as the government looks to improve thebusiness environment to attract investors, despite the boycott.

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GLOBAL INSIGHT


Headline Global IssuesHeadline Global Issues

The sectoral and geographic footprint of the pandemic, concentrated in urban servicessectors, is becoming clearer.Fiscal and monetary policies have shielded the financial sector temporarily by delayinginsolvencies in vulnerable sectors.No full V-shaped recovery will be possible without pharmaceutical interventions thatdo not yet exist, or are unproven.

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GLOBAL OUTLOOK

Global Growth Forecast

Source: Haver Analytics/Dun & Bradstreet

IMF’s ‘baseline scenario’ is optimisticIMF’s ‘baseline scenario’ is optimistic

Even with imminent, successful disease control, the global shock stemming from the coronaviruswill be the biggest since at least the early twentieth century, easily eclipsing the 2008-09 crisis.While the baseline forecast in the IMF’s October World Economic Outlook is for world output toregain its pre-pandemic level in 2021, our forecasts say this will not occur before 2022. The IMF’sbaseline scenario assumes that social distancing measures expire after 2021 and that communitytransmission largely ceases by end-2022. Its adverse scenario, by contrast, assumes a resurgence inthe virus, a slow roll-out of vaccines and treatments, and unequal country access to the latter.Given the resurgence of the virus virtually everywhere that community transmission was noteliminated in Q2, and the uncertainty attendant on identifying and deploying vaccines andtreatments, some elements of such an adverse scenario will inevitably be realised.

The realisation is dawning on policymakers that emergency controls on high-contact sectors arerequired to limit a second wave of the epidemic, but that these controls alone will not suffice toeliminate the virus, while still interrupting the recovery. In this scenario, no V-shaped recovery ispossible without pharmaceutical interventions that do not exist yet, or which are unproven.Accordingly, part of the large shocks seen to date in 2020 could endure in any ‘new normal’,including the 9% fall in global emissions in Q1-Q2, the 5-10% y/y drop in manufacturing outputin many economies in July-August, and the 10% y/y drop in all worker earnings estimated by theILO in Q1-Q3. Annualised advanced country inflation was over 1% in June-August andannualised core CPI inflation in emerging markets accelerated to over 3%. This may partly reflectChina’s recent stockpiling of reserves of some essential commodities, but recovering inflationgiven depressed world demand may also indicate that the global supply-side has already sustaineddamage, lowering future potential output and growth.



Commodity Prices

Commodity Jul 2020 Aug 2020 Sep 2020 2020f 2021f 2022f 2023f 2024f 2025f

Aluminium (USD/tonne) 1,639 1,734 1,745 1,675 1,700 1,750 1,850 2,025 2,037

Copper (USD/tonne) 6,354 6,497 6,712 6,074 6,233 6,295 6,358 6,421 6,410

Gold (USD/ounce) 1,843 1,969 1,922 1,766 1,612 1,450 1,322 1,318 1,340

Brent Oil Price (USD/barrel) 43.2 45.1 41.9 42.0 43.8 50.0 51.0 53.0 52.0

WTI Oil Price (USD/barrel) 40.7 42.4 39.6 39.0 40.9 43.0 45.0 48.0 47.2

Cocoa (USD/kg) 2.1 2.35 2.46 2.25 2.27 2.31 2.33 2.34 2.34

Coffee (US cents/lb) 152.6 166.9 169.2 139.7 130.9 131.0 131.0 131.0 131.0

Phosphate (USD/tonne) 75.0 76.9 79.4 75.4 78.0 78.0 83.0 87.0 88.0

Platinum (USD/ounce) 862 941 907 861 900 975 1,025 1,075 1,090

Soybeans (USD/tonne) 381 385 424 391 375 379 390 395 396

Source: World Bank/Dun & Bradstreet

Exchange and Interest Rates

Metric Jul 2020 Aug 2020 Sep 2020 2021f 2022f 2023f 2024f 2025f

EUR-USD 0.87 0.85 0.85 0.85 0.83 0.83 0.82 1.24

JPY-USD 106.68 106.01 105.59 102.5 110.0 120.0 112.0 115.0

GBP-USD 0.79 0.76 0.77 0.78 0.77 0.77 0.77 0.77

BRL-USD 5.29 5.47 5.36 5.95 5.81 5.77 5.6 5.65

CNY-USD 7.01 6.93 6.81 6.75 6.5 6.5 6.5 6.5

BOJ Interest Rate (EOP) -0.02 -0.06 -0.06 -0.1 -0.1 -0.1 0.0 1.0

ECB Key Interest Rate (EOP) 0.0 0.0 0.0 0.0 0.0 0.25 0.75 1.25

US Federal Funds Rate (avg) 0.13 0.13 0.13 0.13 0.13 0.13 0.38 0.88

Source: Dun & Bradstreet, Haver Analytics, Federal Reserve Board, European Central Bank, Bank of Japan

Key Risk: Pandemic’s sectoral signature becoming clearerKey Risk: Pandemic’s sectoral signature becoming clearer

The pandemic is most of all a crisis of the transportation and hospitality sectors, and the servicessector globally has been more shocked than manufacturing. The latter shrank 11.6% y/y in outputterms in Q1-Q2, ahead of construction’s 9.0% contraction, but short of the 14.6% decline in theretail, wholesale, transportation and accommodation sectors. The impact has also been far fromuniform within countries. Tourist regions in Indonesia, Thailand or Portugal face re-invention orruin, while wealthy suburbs of home-workers have cruised through the crisis. Mass-transit-dependent metropolises like New York and London face more uncertainty than smaller urbancentres, as in Germany. Indeed, mobility troughed, and has failed to recover, more dramatically inmajor cities: footfall in London, Toronto and Amsterdam even started to fall again in October.

OECD governments with investment grade ratings have paid up to limit the contagion impacts ofthe shock, for example by maintaining household incomes. Central banks have masked solvencyrisks in stressed sectors with more liquidity and loosened bankruptcy frameworks. The result hasbeen a global financial crisis averted, and many financial sectors reporting a good Q2 despite thecrisis. However, these feats only pay off if the disease is contained quickly. Given theepidemiological situation, all this may only delay insolvency in vulnerable sectors until 2021,while endangering sovereign ratings and banks' capital. Indeed, the plunge in net savings rates intonegative territory of OECD economies in Q2 is a concern for the US, but also for Canada, France,the UK, Italy and Spain. It erodes the financial resources of firms, household and governmentsthat they need to rebound from the pandemic.

RecommendationsRecommendations

Note that export credit insurance written in Q1-Q2 fell y/y, especially from the privatesector and for medium- and long-term projects.Expect global economic activity to remain well below the pre-pandemic baseline exceptin a few highly privileged sectors such as public health and e-commerce.

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REGIONAL INSIGHT


Headline Regional IssuesHeadline Regional Issues

The MENA region faces multiple factors that ensure risks remain elevated, includingcivil wars, the presence of radical groups, and socioeconomic popular protests.There are also elevated tensions in the Persian Gulf and between Israel and Iran; eitherset of tensions could lead to military action.Covid-19 has seen the regional economy entering recession; supply chains are againbeing threatened as new cases globally are climbing to new highs.Oil prices remain weak, but this will force the oil-exporting countries to liberalise theireconomies, opening up opportunities for cross-border trade and investment.Long-term structural issues, such as a lack of transparency, high governmentinvolvement in the economy, and corruption also undermine the business environment.

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REGIONAL OUTLOOK

Regional Growth Forecast


The spread of Covid-19 has added yet another challenge when doing business regionally. Borderclosures, lockdowns and curfews have resulted in the regional economy entering recession; we arecurrently forecasting a contraction of 5.6% in 2020, with a return to growth in 2021 of 2.4%(although as with all forecasts there is a high degree of uncertainty at present). The oil economiesare facing a triple whammy: policies to control the spread of Covid-19; production quotasimposed by the OPEC+ agreement (albeit these are easing); and the collapse in the global oil price- which we now forecast will average USD42.0 per barrel (/b) in 2020, down 34.4% on the 2019outturn, and USD43.8/b in 2021.

Meanwhile, the security and political situation remains fraught, with multiple foci of concerns,any of which could spiral out of control. Extra-regional actors such as Turkey, Russia and (atpresent) the US intervene for their own ends to a lesser degree, while regional actors such as Israel,Iran, Saudi Arabia, Egypt and increasingly the UAE vie for power. Hotspots include Libya, Syria,Yemen, Iraq and Lebanon, where the Islamic Cold War between Saudi Arabia and Iran is at itsmost intense.

Other areas of concern include US-Iranian and Israeli-Iranian tensions: these could see greateradventurism by Iran and its regional proxies - which could focus on regional oil installations andPersian Gulf shipping. Cyber-attacks on US-linked businesses and Western and regionalgovernment sites should also be expected. Finally, anti-government popular protests of varyingdegrees across the region in Algeria, Bahrain, Egypt, Iraq, Jordan, Lebanon and Morocco threatendomestic stability and by extension the business environment. As such, we have kept our regionaloutlook status at 'deteriorating'.



Outlook for Key Regional Countries


In Saudi Arabia, the impact of the weaker oil price, the OPEC+ production quotas and the policiesassociated with containing the coronavirus outbreak will result in the economy contracting by6.3% in 2020 before a rebound to 2.4% in 2021. The UAE is facing similar factors to SaudiArabia, which means that its economy will contract by 5.2% in 2020 before strengthening to3.5% growth in 2021. Meanwhile, the impact of the Covid-19-driven lockdown in Israel will seethe economy contract by 6.6% in 2020, before returning to growth in 2021, at 1.8%. In NorthAfrica, Egypt will be the only MENA country to grow in 2020, while Morocco, whose economy issusceptible to weather conditions, will contract by 5.4% in 2020 before rebounding by 4.9% in2021.

In the medium term, weak oil prices - we are forecasting an average price of USD50/b from 2021to end-2025 - will force governments in the region’s oil-exporting countries to adopt a moremarket-oriented approach in their economic decision-making. The change in policy will open theseeconomies to cross-border opportunities as state and quasi-state entities are privatised, subsidieslifted, and trade and investment barriers eased.

However, we warn customers that progress will be slow, that it is unlikely to be smooth, and thatthere will be sudden reversals of policy that could put assets at risk. In the oil-exporting countriesthat are less politically or economically stable - Algeria, Iran, Iraq, and Libya, and to a lesserdegree Bahrain and Oman - governments will be reluctant to radically change economic directionover the next two years, for fear of increasing political and security tensions.


Be aware that the downsides of the Covid-19 pandemic will act as a drag on regionalgrowth well into 2021 (at least).Plan for the annual average Brent spot oil price to remain weak until at least 2025.Comply with any sanctions imposed by your country, and with legal advice about theramifications of US secondary sanctions on Iran.Consider the impact on your reputational risk if doing cross-border business in theregion's authoritarian countries.Beyond the short term, look for cross-border trade and investment opportunities(including IPOs/bonds) as oil-exporting countries diversify/open their economies.Plan for regional security issues in Libya, the Persian Gulf or around Israel todeteriorate suddenly, negatively impacting supply chains and business opportunities.Where available, take advantage of political risk insurance where appropriate.

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COUNTRY INSIGHT HEADLINES

CREDIT ENVIRONMENT OUTLOOK

Trend: Stable

Current IssuesCurrent Issues

Qatar was the region’s first post-crisis bond issuer in April 2020, securing strongdemand for USD10bn in 5-30-year bonds.A moratorium on loan repayments (part of the coronavirus support package) expired inSeptember, but there have been no signs of major distress in the business sector.Qatar has improved access to credit information, boosting its score and rank for gettingcredit in the World Bank’s Doing Business 2020 report.

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Risks and OpportunitiesRisks and Opportunities

Coming into the crisis, private-sector borrowing was growing at 21% y/y in February,close to a four-year high, adding to concerns about impairment risks.Real estate prices have been in decline for four years and are down by over 30% fromtheir November 2015 peak, raising concerns about potential credit risks for banks.

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Trade Terms

Description

Minimum Terms OA

Recommended Terms OA

Usual Terms 30-60 days


Export Credit Cover

Agency Cover

US Eximbank Full cover available

Atradius Full cover available

ECGD Full cover available

Euler Hermes UK Full cover available

Source: Export Credit Agencies


Investigate options for loan payment deferrals or concessional refinancing linked to thegovernment’s coronavirus crisis response.Be aware that some international banks remain wary of doing business in Qatar for fearof being penalised by Saudi Arabia and the UAE, in view of their boycott of Qatar.Consider financing opportunities through banks located in the Qatar Financial Centrefree zone, which has strong court and arbitration mechanisms.

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SUPPLY ENVIRONMENT OUTLOOK



In April 2020, we downgraded the Supply Environment Outlook trend indicator to'deteriorating' on the back of the coronavirus pandemic.In June, the government began a four-phase lifting of coronavirus restrictions, relievingsome of the internal logistical challenges.Saudi Arabia, UAE, Bahrain and Egypt continue to keep a trade boycott in place, whichcomplicates pan-GCC distribution.

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If international tension with Iran restrict flights over its airspace or shipping in the Gulf,this could have a severe impact on supplies to Qatar when compounded by the boycott.Were the regional boycott to end, there could be opportunities to cut costs by reroutingsupply routes via the UAE and Saudi Arabia.The Barzan gas project will increase domestic electricity production to meet futuredemand growth (though the coronavirus crisis has temporarily dampened this).

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Natural Disaster Impact

Source: D. Guha-Sapir, R. Below, Ph. Hoyois - EM-DAT: International Disaster Database – www.emdat.be – Université Catholique de Louvain


Ensure business continuity plans take into account a range of potential pandemicscenarios.Look for opportunities for improved logistics management in the new free zones closeto the main port and airport.Monitor the expansion of Hamad Port as capacity increases and it becomes able toaccommodate larger ships; new and cheaper supply options may become available.

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MARKET ENVIRONMENT OUTLOOK



In April 2020, we downgraded the Market Environment Outlook RAG status to Amberand the trend indicator to 'deteriorating' on the back of the coronavirus.The government is opening the economy to foreign investors as seen by the new PPPlaw, and the easing of restrictions on foreign property ownership.The crash in oil prices and associated spending cuts, as well as the lockdown, havelikely pushed the already weak non-oil sector into its first contraction in decades.Early work is under way in developing offshore and onshore infrastructure for theplanned 64% increase in liquefied natural gas (LNG) production in 2025-27.

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A foreign-investment law passed in January 2019 could permit 100% onshoreownership in many sectors; detailed implementation regulations are still pending.Infrastructure for the World Cup is nearly complete, but there will be new opportunitiesto provide goods and services for the event as it draws nearer.A longer-than-expected delay in the awarding of the main LNG train contracts for theNorth Field Expansion would undermine the Market Environment Outlook.

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Nominal GDP and GDP per capita



Track announcements related to the phased reopening of the economy, as coronavirusinfections are gradually brought under control.Monitor opportunities resulting from the new PPP law, especially in developingfacilities for the education and healthcare sectors.Note that Qatari courts do not enforce foreign rulings when an investment agreement isin place.

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POLITICAL ENVIRONMENT OUTLOOK

Trend: Stable


The elections for the advisory Shura (Legislative) Council are to be held in October2021, but power will remain firmly centralised with the emir.The emir of Qatar was among the Arab leaders to quickly congratulate the USpresident-elect, Joe Biden, for his election victory.In October, Qatar approved USD1bn in direct aid to Oman, consolidating its ties withthe cash-strapped sultanate, although this will provoke the boycotting countries.Qatar’s strong alignment with Turkey stokes tensions with the boycotting countries,which view Turkey’s regional ambitions with deep suspicion.

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Joe Biden’s election as the new US president may create an opening for a resolution tothe boycott.A turbulent regional environment, including Saudi/US-Iran tension and a wave ofprotests in several countries, poses hard-to-predict risks.As the 2022 FIFA World Cup draws near, Qatar could face a fresh round of criticismon a range of issues such as corruption and worker rights.

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Political Freedom

Location Electoral Process

Pluralism and Particip.

Function'g of Govt.

Freedom of Express'n and Belief

Assoc. and Org. Rights

Rule of Law Personal Autonomy and Individual Rights

Qatar 2 2 3 7 2 5 4

Middle East &North Africa

3 4 2 6 3 4 5

OECDAverage

12 15 10 14 11 13 14

Source: Freedom House

Higher score = greater degree of freedom


Be prepared for the boycott to remain in place long term, including when makingstaffing and investment decisions.However, also plan for opportunities should it be lifted, which could happen suddenly.Factor in a lower risk of US-Iran tensions impacting Qatar than other regional statesbecause of its friendly relations with Iran.

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DETAILED ANALYSIS

The following sections analyse in more detail the nine core elements that influence the risks andopportunities involved when doing business in/with a given country.

The core categories that we analyse as part of our broader risks and opportunities model are asfollows:

Short-Term Economic Outlook

Long-Term Economic Potential

Market Potential

FX Risk

Transfer Risk

Business Regulatory Environment

Business Continuity

Political/Insecurity Risk

Expropriation/Nationalisation Risk

Descriptions for each of these categories can be found in the User Guide section of this report.



SHORT-TERM ECONOMIC OUTLOOK

In April 2020, we downgraded Qatar's risk outlook to 'deteriorating', the Market EnvironmentOutlook RAG status to Amber, and the trend indicators on the Market Environment and SupplyEnvironment Outlooks to 'deteriorating', on the back of the coronavirus pandemic.

A resurgence of coronavirus cases globally and the return of lockdown measures will dampenglobal energy demand, which will pressure government revenues (driven largely by natural gasexports). In response to the pandemic, the government passed a USD20.6bn economic relief andstimulus package (the largest in the Gulf region) that focused on shoring up small- and medium-sized enterprises and hard-hit sectors such as hospitality, tourism, retail, commercial complexesand logistics. Qatar’s Purchasing Managers’ Index (PMI) registered 51.5 in October, upmarginally from 51.4 in September, in an indication of the sustained rebound in businessconditions of Qatar’s non-oil private sector (any reading above 50 indicates an expansion in non-oil economic activity). The latest figure was the third-highest since July 2018, suggesting that thegovernment’s fiscal intervention helped avoid a wave of insolvencies in the business sector. InMay, the PMI had plummeted to 36.6, reflecting the impact of the coronavirus on aggregatedomestic demand. Beginning in June, a gradual easing of coronavirus restrictions stimulatedbusiness activity on account of demand backlogs that accumulated during Qatar’s lockdown.Private-sector credit growth has eased from a pre-pandemic high of 21% y/y to 14.5% y/y and10% y/y in Q2 and Q3 2020 respectively, reflecting damaged sentiment in the business sector andpossibly stricter requirements for loan approvals from banks.

To counterbalance the budgetary pressures brought on by lower oil prices, the government alsoslashed capital spending this year by around 20%. In the previous five years, non-hydrocarbonsector growth benefited from strong government spending growth related to the completion ofmajor infrastructure projects. This year, the fiscal squeeze has forced the cancellation orpostponement of non-priority infrastructure projects until after the 2022 FIFA World Cup thatQatar is set to host. Expatriate lay-offs and salary reductions (intended to cut current spending)will also weaken the purchasing power of non-nationals and dampen private consumption.

However, several factors will boost the economy in the coming years. Firstly, the long-delayedBarzan gas project is complete and will come online as soon as there is sufficient domestic demandfor the new gas, including for power generation. Secondly, work will pick up in H2 2020 on theNorth Field Expansion project, which will lift LNG production by 64%; this will not come on-stream until about 2025, but around USD60bn of investment into six new trains in Ras Laffanand associated infrastructure, as well as a giant new petrochemicals plant, will provide renewedimpetus to construction and many sectors down the supply chain. Finally, the World Cup inNovember 2022 will provide a substantial short-term demand boost, Overall, we expect real GDPto contract by 2.7% in 2020 before returning to growth of 1.9% in 2021 and then 3.5% in 2022.


If average oil prices outperform our forecasts, then government spending may bestronger than assumed, providing an additional economic boost.If the coronavirus crisis eases in H2 more quickly than anticipated, this would providebroad-based support for the non-oil economy.Uncertainty about the medium-term outlook for LNG spot prices (and in turn the termsfor long-term contracts), given rising US and Australian output, creates additional risk.

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Real GDP Growth and Inflation


As in several Gulf countries, Qatari consumer prices have experienced a period of deflation, owingto falling rents and weak demand related to a strict coronavirus lockdown earlier in the year aswell as global disinflationary drivers. The deflation began in September 2018, but had begun toease by February 2020 (to 0.6% y/y). However, the coronavirus crisis provided a furtherdeflationary impulse, particularly on the recreation and retail sectors, leading to a peak level ofdeflation in August of 4.1% y/y. We expect average annual average deflation of 2.4% in 2020. IfVAT is finally introduced in 2021 (our base scenario), this, combined with the post-coronavirusdemand rebound, should drive an uptick back to around 1.5% annual average inflation in 2021.

Investment and Imports

Source: Dun & Bradstreet, Haver Analytics/Dun & Bradstreet

The bulk of investment continues to come from the government and government-relatedcompanies. However, greater private-sector and foreign investment is likely in the coming years,as a result of LNG expansion and the enactment of a PPP law. Infrastructure investment remains amajor driver for imported inputs; this is expected to remain strong in the next few years in therun-up to the 2022 World Cup and the completion of the new LNG trains from around 2025. Arapid slowdown in immigration over the past few years, as population nears a peak, means thatimport demand for consumer goods is likely to have plateaued. It may well fall in 2020 andthereafter, as expatriate workers are fired due to the oil and coronavirus crises and as import-substitution efforts, particularly in food production, bear fruit.


Monitor developments in the boycott imposed by Saudi Arabia and its allies; anyescalation will affect cross-border trade and investment risks.Follow policy announcements on VAT: there is a possibility, outside our core scenario,that it could be abandoned to differentiate Qatar from other GCC states.Prepare for a more flexible labour market as Qatar makes further reforms.

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LONG-TERM ECONOMIC POTENTIAL

Government spending and policy will remain the main determinant of long-term potential, as ithas been throughout Qatar’s history. After the 2022 World Cup is over, the major economic storywill be the North Field expansion project (current plans aim to boost LNG output by 64%) withsix new production trains (the final two were announced in November 2019 following areappraisal of North Field which doubled its estimated gas reserves and extended their range). Thequestion will then be how the government looks to recycle the additional revenue when they comeon-stream during 2025-27. With Qatar’s production volumes set to drastically increase, demandsecurity is a key challenge. A wave of new supply due to come on-stream globally in the comingyears threatens a glut by mid-decade, and thus a period of subdued prices. QP not only has nocustomers lined up for any of the new capacity, but many of the long-term supply contractsabsorbing existing production are due to expire during the 2021-25 forecast period. In October,QP booked additional European LNG storage and regasification capacity at the UK’s Isle of GrainLNG terminal; a move intended to secure its position in increasingly important north-westernEuropean markets. The diminishing cost and rising uptake of renewable energy technology alsolooks to hasten the transition away from fossil fuels in some of the rapidly industrialising markets(such as China and India), further clouding the prospects of long-term LNG demand.

By the mid-2020s, Qatar will have most of the infrastructure and real estate it needs, and thepopulation of expatriate workers (at least half of whom are involved in some way withconstruction) is likely to decrease significantly, unless a new business model develops. However,most of those who will depart are not significant consumers, which will minimise the negativeeconomic impact of these departures. Qatar’s long-term development is focused on the NationalVision 2030 and guided by a series of five-year plans, called national development strategies, thelatest of which was published in April 2018. There is a growing focus on diversification,particularly to support greater self-sufficiency and import substitution. The crash in oil prices in2020 should provide a further impetus for diversification efforts.


Reforms to improve the business environment and reduced restrictions on foreigninvestment should create new opportunities, although implementation will be slow.If the regional boycott continues for the long term, this will limit Qatar’s potential toserve as a regional hub for financial services, logistics and other sectors.Changes to residency rules, to encourage skilled expatriates to commit to the country,could improve labour-market flexibility and boost productivity.

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Human CapitalHuman Capital

Mean Number of Years of Schooling

Source: Human Development Reports/United Nations

Qatar has one of the world’s highest levels of expenditure on education per pupil, but theoutcomes are comparatively poor, according to the 2018 Programme for International StudentAssessment (PISA). In maths, reading and science, Qatar was ranked 61st, 60th and 57threspectively, out of 78 countries. However, it is on an improving path in all these areas: indeed,



compared with 2006 scores it was by far the most-improved country on all these measures. Thegovernment is investing significant sums in education in order to raise standards; the NationalVision 2030 puts education at the centre of its plans for the development of the country.

Physical CapitalPhysical Capital

Qatar has the world’s third-largest reserves of gas, as well as significant oil reserves (althoughfields are mature and oil production is well past its peak level). It has used its hydrocarbonswealth to develop additional physical capital, including world-class transport infrastructure andutilities. The infrastructure build is now gaining pace in the run-up to its hosting of the World Cupin 2022, including a metro system for Doha, which began operation in 2019. A national railnetwork is also under construction. The government has already invested significant sums ininfrastructure and is expected to have spent upwards of USD250bn before the competition, addingconsiderably to the stock of physical capital in the next few years.

OpennessOpenness

Exports and Imports

Source: IMFDOT/Haver

Qatar has liberalised its economy only gradually, in order to protect home-grown industries, butits huge domestic development programme has required the country to open it up more to FDI,which has risen considerably in recent years (before slowing in 2016 after the drop in the oil priceand in 2017, following the boycott). Moves are afoot to liberalise the services sector within WTOrules, connecting it more closely to the global financial system and helping attract greater inflowsof portfolio investment. Foreign investors are now permitted to own up to 49% of almost all listedcompanies, with some of the largest ones only finally allowing this in 2018. In January 2019,Qatar’s sovereign bonds were also added to JP Morgan’s benchmark Emerging Market BondIndices.

Competitiveness/Institutional StrengthCompetitiveness/Institutional Strength

Qatar’s institutional strength is constrained by its low levels of human capital. The countrystruggles to find sufficient qualified nationals to manage and run its institutions, the operations ofwhich are consequently hampered by highly centralised decision-making processes.


Read the National Development Strategy 2018-22 to get a sense of the government’spriorities and long-term growth strategy.Prioritise recruitment and retention of well-educated and connected nationals, who aredifficult to attract into the private sector.Monitor progress in the roll-out of the North Field LNG expansion project.

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MARKET POTENTIAL

Qatar’s market potential is limited by its small population of 2.8m. Moreover, the majority of thepopulation are low-paid migrant workers in construction and other services sectors. However, thecitizen population of about 0.3m is highly affluent, as are a similar number of highly skilledexpatriates. This group of wealthier consumers, along with the government, provide the bulk ofdemand in most market sectors. The FDI environment has been gradually liberalised over the lasttwo decades. Most foreign participation is undertaken in joint ventures limited to 49% ownership.A 2010 amendment to the FDI law permits foreign nationals 100% ownership in some companies,including consultancies, IT firms, and businesses operating in the sports, culture, entertainmentand distribution sectors. Full ownership is also permitted for firms registered in the QatarFinancial Centre.

A new foreign investment law passed in 2019 should widen the range of sectors in which fullownership is permitted, although details are pending in executive regulations under the law.Regional political problems complicate Qatar’s market potential, including the boycott introducedin June 2017 by three of its GCC neighbours. The coronavirus crisis is having a significant short-term impact but is unlikely to significantly damage the medium-term market potential.

The newly enacted PPP law had been in the works for years but has come at a time when capitalspending is slowing down to cope with the downward pressure on government revenues. This willblunt the short-term effectiveness of the law, but could create opportunities in the medium term ifa rebound in energy prices restores the pre-pandemic pipeline of projects. PPPs have been the go-to model in the power generation and water distribution sectors, but promising sectors includewaste-treatment plants, solar power plants, landscaping and beautification, hospitality, andstorage and warehousing facilities (especially at the new sea port).


Apart from infrastructure development, major opportunities exist in various sectors ofthe Qatari economy, including health, educational services, security and franchising.Even if the regional boycott is lifted, the risk of a future repeat (on account of Qatar’sperceived maverick foreign policy) would continue to harm Qatar’s market potential.However, Qatar’s drive for greater self-sufficiency, including in food production, couldopen up new market opportunities.

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Average Nominal GDP Expansion, 2021-25




In the medium term, because oil and gas production will be stagnant until the new North Fieldexpansion comes online from around 2025, nominal GDP will be driven by fluctuations in energyprices and by trends in the non-oil sector. Growth in the non-oil sector and the lower oil priceshave reduced the share of hydrocarbons in nominal GDP to just over a third in 2019, down fromwell over the half that it had been for much of Qatar’s modern history. Growth in the next fiveyears will be powered mainly by the service sector.

In 2020, the recession will cause nominal GDP to shrink sharply, which will push up thedebt/GDP ratio, which is set to increase to 68% in 2020 from 50% in 2018, compounded byhigher borrowing. For credit rating agencies, the government debt/GDP ratio is a closely watchedmetric that, if the debt build-up accelerates, could place the government’s bond ratings on watchfor a downgrade. The debt side of the equation is also increasing as Qatar’s policy is to tapinternational investors to fund the budget, as opposed to drawing down on sovereign wealth fundassets (taking advantage of the low interest rate environment).

Main Restrictions on Imports

Tariff Barriers Qatar Bahrain Kuwait S. Arabia UAE

Overall Weighted Mean Tariff 3.7 4.3 4.8 4.9 4.4

Manufactures Weighted Mean Tariff 3.3 1.7 3.3 3.8 3.0

Primary Products Weighted Mean Tariffs 6.8 16.6 11.4 9.5 19.4

Overall MFN Tariff 0.1 0.1 0.1 0.3 0.2

Manufactures MFN Tariff 0.0 0.0 0.0 0.0 0.0

Primary Products MFN Tariff 0.5 0.5 0.3 1.5 0.9

Services Restrictiveness Index 60.1 50.8 51.8 42.5 16.2

Source: Haver Analytics/World Bank

The import licence system is one of the most significant non-tariff barriers to entry into the Qatarimarket. Under this system, only holders of import licences may import goods, and only Qatarinationals who are members of the Qatar Chamber of Commerce and Industry can hold suchlicences. This prevents the free import of goods into the country, and foreign companies wishingto enter the Qatari market must find a local partner to act as an importer.

A GCC customs union was created in 2003, establishing a common external tariff (CET) at 5.0%.The union also abolished customs duties for products manufactured in the region. Under theunion, goods moving from free-trade zones to other GCC states attract customs duties. Essentialproducts are zero-rated. Where permitted, tariffs on pork, alcohol and tobacco can be 100%. Afull customs union was finally implemented in January 2015, allowing goods entering one GCCmember state to be shipped onwards to any other member state without further inspection or dutypayments. The 2015 agreement ensures equitable customs revenue sharing between the tradepartners. However, if the trade embargo by Saudi Arabia, UAE and Bahrain remains in place, theGCC customs union may effectively collapse.


Although the import licence system is tight, companies with government contracts cansometimes receive a waiver.Monitor government tendering and progress towards putting in place a PPP framework.Monitor developments in the diplomatic incident with Saudi Arabia and its allies, whichcould lead to the break-up of the GCC, undermining Qatar’s market potential.

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FX RISK

The Qatari riyal has been pegged to the US dollar for decades. This, combined with the country’soil wealth and sizeable foreign reserves and assets, has meant that FX risk has historically beenvery low. The regional boycott sparked concerns about the peg and although Qatari banks,including the central bank, have maintained FX transactions at this level, there have been a fewperiods of tight liquidity. Meanwhile, the riyal has been volatile in offshore trading, falling to arecord low of about QAR3.92:USD in November 2017, although it has since recovered and hasonce again been trading within a few basis points of the peg since early 2018.

The central bank is conducting an investigation into alleged manipulation of the offshore currencymarkets by Qatar’s regional rivals. Aside from formal central bank foreign reserves, which stoodat around USD37.6bn in September 2020, providing import cover at a far higher level than theIMF’s minimum recommended import cover of 3.0 months, Qatar has other liquidity and morethan USD200bn in foreign assets held by the Qatar Investment Authority. It also has the capacityto raise FX through borrowing, such as the bond issue in April 2020. As such, we are confidentthat Qatar will remain committed to, and capable of maintaining, its currency peg to the USdollar.


The peg might face additional pressure if the boycott were to be escalated to includefinancial transactions, which are currently permitted, although this is highly unlikely.One of the fiscally weaker Gulf states, such as Oman, may be forced to devalue itscurrency in the current crisis, but this is still unlikely to cause contagion to Qatar.The downside to the Qatari riyal’s peg to the US dollar is a loss of monetaryindependence; another global economic downturn would expose this vulnerability.

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Current Account Balance


The current account has a consistent structure, with a large surplus on the trade account (drivenby hydrocarbons exports), usually outweighing persistent deficits on the income, services andtransfers balances. The low point of oil prices in 2016 resulted in a rare current-account deficit of5.5% of GDP, but this returned to a surplus in 2017-19. The current crash in energy prices meansthat an even larger deficit than in 2016, in the order of 7.3% of GDP, is expected. However,thereafter a renewed surplus is expected to persist over the outlook period. The income accountremains in deficit as a result of high profit repatriation, mostly involving oil and gas companies,whereas the Qatar Investment Authority generally keeps its foreign income offshore for re-investment. The services deficit is sustained by high domestic demand and high outlays ontransport and services related to oil and gas, and outbound payments by the expatriate workforceresult in a deficit on the current transfers account.



Import Cover


Qatar’s international reserves peaked at more than eight months of import cover in 2013, beforeeasing as a result of lower oil and gas prices. They then fell sharply following the imposition of theregional boycott in June 2017, because of capital flight, particularly deposit withdrawal by non-residents (who had been attracted to Qatar in prior years by its stable dollar peg and interestrates). However, since 2018, international reserves have been boosted again by higher exportearnings and there have also been new capital inflows, including non-resident deposits and foreignportfolio investment in the stock market. Importantly, import cover will remain significantlyabove the three-month minimum recommended by the IMF for emerging economies; thus ensuringFX risk remains minimal.


Note that there is no need to hedge when invoicing in US dollars.Be aware that when invoicing in euros, exchange-rate risk is limited to changes in crossrates between the euro and the US dollar.Adjust your exposure to Qatar should there be an increased chance of it being drawninto a regional conflict.

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TRANSFER RISK

Transfer risk is limited because of the central bank’s firm pledge to maintain liquidity and Qatar’slarge foreign reserves. However, it is possible that short-term liquidity problems may occasionallyemerge. The social stigma attached to bankruptcy proceedings means that few companies fail,although there is also a pervasive culture of late payment, especially within the public sector andwhen access to new finance is more restricted. At present, the transfer situation is good, with bothlocal and FX/bank delays standing at zero to one month.


The banking system is heavily exposed to foreign funding, a heightened risk in thecurrent political climate.There is a risk that some banks have become over-exposed to the real estate sector.A lack of basic credit information makes it difficult to assess the business viability ofQatari firms.

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Transfer Situation

Type Delay

FX/Bank Delays No delays reported

Local Delays 0-1 month


Financial Sector/Capital Flows Provisions

Provision Active

Restrictions on Inward Direct Investment Yes

Special Treatment for Deposits held by Non-Residents No

Special Treatment for Deposits in Foreign Currency No

Special Treatment for Lending to Non-Residents No

Source: International Monetary Fund

Trade Payment Restrictions

Trade Payment Restriction Qatar Middle East & North Africa OECD Average

Restrictions on non-Residents' Accounts 0 0.11 0.06

Restrictions on Payments for Imports 0 1 0.06

Restrictions on Payments for Invisible and other Current Transfers 0 1 0.35

Source: International Monetary Fund

Full export credit cover is still available on trade with Qatar, despite the recent trade embargoimposed by some of Qatar’s neighbours. The OECD’s country risk classification (for participantsin its scheme for setting minimum premiums for export credit) ranks Qatar at 3.0 on a scale of 0.0to 7.0, where 0.0 represents the lowest risk and 7.0 the highest risk. Since 1973, Qatar hasaccepted the obligations of Article VIII of the IMF’s Articles of Agreement. The country imposesalmost no restrictions on current-account transactions, and there is no restriction on themovement of funds to pay for imports. Financial transactions with Israel are prohibited.Regulations to combat money laundering require all financial transactions in excess ofQAR100,000 to be reported to the central bank.



Total Foreign Debt and Foreign Reserves


Qatar has a high level of foreign debt relative to its peers as a result of financing for the LNGbuild-out in the 2000s, and more recently for the infrastructure build-out. Qatari banks relyheavily on foreign financing. However, Qatar’s banking system will remain well capitalised andprofitable during the forecast period and beyond. Ratios of non-performing loans are generallybelow 3.0% for the largest banks, and Tier 1 capital ratios are in excess of 13%; institutions haveenough funding available to finance moderate expansion. Overall, Qatar's position as a netinternational creditor ensures transfer risk remains low.


Transfer risk associated with the state sector may increase slowly during the forecastperiod, as banks use up their internal credit limits for this category of lending.We recommend SD terms when dealing with local counterparts, and usual terms shouldbe 30 to 60 days; mandatory checks should be conducted on new trading partners.

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BUSINESS REGULATORY ENVIRONMENT

The regulatory environment is generally favourable and perceptions of corruption in Qatar arelow. There are, however, a number of key commercial challenges to doing business in Qatar,including limited administrative capabilities within government, restrictive labour regulations,sometimes weak contract enforcement, an inadequately educated workforce and a legal systemthat is often not equipped to deal with complex commercial disputes. However, an updatedbankruptcy law is under discussion.

In August, the government announced that it was scrapping a rule requiring employers’ consent tochange jobs, known as a “no-objection certificate” (NOC). The NOC reform should improvelabour market conditions and enhance productivity by allowing skilled workers to swiftly changeemployers and perform at their full potential.


Starting a new business in Qatar can be difficult, the biggest obstacle being therelatively high paid-in minimum capital required.The tax environment is among the most competitive in the world.Contract enforcement can sometimes be a challenge in Qatar.

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Corruption Perceptions Index, 2019

Source: Transparency International, 'Corruption Perceptions Index'

Note: 100 = least corrupt, 0 = most corrupt

Transparency International’s Corruption Perceptions Index 2019 ranked Qatar a strong 30th outof 183 countries surveyed, with a score of 62 out of 100, and the second-highest-ranked countryin the Middle East, ten places behind the UAE. Qatar has signed the UN Convention AgainstCorruption and has created various bodies tasked with rooting out graft, including the NationalCommittee for Integrity and Transparency. It has also opened the Anti-Corruption and Rule ofLaw Centre. Allegations continue to be made of possible corruption during Qatar’s successful bidin 2010 for the 2022 World Cup, although a FIFA-sponsored report (issued in late 2014)exonerated Qatar.



Ease of Paying Taxes, 2020

Source: World Bank, 'Doing Business Report'

Ranking: Low score = best, High score = worst

The tax environment is extremely competitive, with Qatar ranked as the third-most-competitivecountry globally for paying taxes in the World Bank’s Doing Business 2020 report. Companies inQatar spend an average of 41 hours per annum preparing, filing and paying their tax returns,compared with an OECD average of 159 hours. The total tax rate in Qatar is a very low 11.3%;it is 39.9% in the OECD. We do not anticipate any substantial new taxes being introduced (withthe exception of VAT).


Expect ongoing allegations of World Cup graft, but do not expect these to alter Qatar’shost-nation status or its massive spending programme.Qatari courts do not enforce judgements made by other nations when a bilateralinvestment agreement is in place.Companies will find that in Qatar (as is typical in many Gulf States) the strength oftheir political connections may prove to be decisive in gaining or losing a contract.Factor into corporate planning the fact that parts of Qatar’s bankruptcy law remainuntested; this is a reflection of the secrecy surrounding insolvency in the country.

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BUSINESS CONTINUITY

In normal times, business continuity risks are low in Qatar. In the World Risk Report 2020,published by the United Nations University Institute for Environment and Human Security (UNU-EHS), Qatar was assessed to have the lowest risk in the world of the 181 countries measured. Thereport looked at four categories to measure disaster risk: exposure to natural hazards,susceptibility, coping capacities and adaptive capacities.

Qatar’s infrastructure is relatively well developed, with further improvements either under way orplanned. The ongoing trade embargo on Qatar by its neighbours has tested the country’s logisticalinfrastructure and relationships, but the country appears to have coped well by diversifying importsources and supply-chain routes. The coronavirus crisis poses similar continuity risks in Qatar asin other countries globally.


Average rainfall is amongst the lowest in the world, but per-capita water consumptionis amongst the highest; all three of Qatar’s water sources are under stress.The average costs of importing into and exporting from Qatar are lower than in theOECD, but there are more procedures and trade across borders takes longer.The trade embargo has resulted in rising costs and an increase in the complexityof logistics network.

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Natural Disaster Impact

Source: D. Guha-Sapir, R. Below, Ph. Hoyois - EM-DAT: International Disaster Database – www.emdat.be – Université Catholique de Louvain

Natural Disaster Risk: Few natural disasters afflict Qatar, the exception being occasional harshtropical cyclones with the potential to damage oil platforms, construction, and gas and oildeliveries. However, the risk of such damage is very low. There is an occasional risk of flashfloods, as happened in October 2018, when a year’s worth of rain fell in one day.



Logistics Performance Index, 2018

Source: World Bank

Note: 1 = worse performance, 5 = better performance

Logistics and Infrastructure: Qatar’s project development programme is well under way, althoughthe oil-price slump has forced a re-evaluation of some of the less-critical schemes. Under thenational development strategy, the government has allocated total spending of USD260bn up to2022, with funds going towards the Lusail city development, the regionally integrated railwayproject, Hamad Port, the Barzan gas project, football-related infrastructure in the run-up to the2022 World Cup, and an extension to the Hamad International Airport. Some of these projectsmay struggle to maintain momentum as the regional trade embargo on Qatar complicates logisticsnetworks and increases costs.


Firms that can build desalination plants and maintain pumping stations should developgovernment ties; USD6.0bn investment is needed over the next decade.Consider locating commercial premises in the new free-trade district, close to HamadInternational Airport.Closely monitor Qatar’s relations with its neighbours, as any further changescould affect commercial trade.

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POLITICAL / INSECURITY RISK

Despite the rise in regional political tension, domestic security in Qatar is strong and the countryremains politically stable. Crime levels remain well below those in North America and WesternEurope. Qatar is a potential target for jihadist groups, particularly given its close relations withthe US and its hosting of the largest US airbase in the region, but has historically only suffered oneattack (a bombing in 2005, which killed one man). The regional boycott has an economic cost, butdoes not pose specific security risks. Saudi Arabia did reportedly consider invading Qatar insummer 2017, but was talked down from this by the US, and it is unlikely that such action wouldbe contemplated in the future.

Qatar closely co-ordinates its foreign policy with Turkey, with which it has cultivated a closerelationship at the level of heads of state. Turkey has maintained a military base on Qatari soilsince 2015 under a strategic defence agreement, and Qatar has repeatedly provided emergencyfinancial support to Turkey when the Turkish currency has come under extreme stress. Theboycotting countries view Qatar and Turkey as having formed an axis that backs the proliferationof political Islam in Arab countries. In October, the UAE’s minister of state for foreign affairsdescribed Turkey’s military presence in Qatar as an “emergency”. Qatar’s co-operation withTurkey in Libya, where the two countries provide financial and military support to the UN-recognised Government of National Accord, is provocative to the UAE and Egypt, who havesupported the opposing camp in the Libyan conflict. Tensions between Qatar and the boycottingcountries remain high on several fronts, impeding the path to a resolution of the boycott.

The USD1bn in aid that Qatar has extended to Oman is intended to reciprocate Oman’s decisionto resist pressure from the UAE and Saudi to join them in boycotting Qatar. Oman has allowedQatar to use its Port of Sohar for trade and transport, a decision that has vastly boosted Oman’sfavourability among the Qatari leadership and public.

On the domestic front, in November, the emir announced that long-promised elections for theShura (Legislative) Council would be held in October 2021. With power almost entirelycentralised with the emir, the Shura Council is effectively a rubber-stamping legislature.Regardless of when the elections will be held, the Council is expected to remain loyal to the emir.Given neighbouring Kuwait’s persistent policy deadlocks, on account of its powerful parliament,the appetite for greater political openness in Qatar is very weak.


There are no serious domestic challenges to the present regime; we do not foreseeinternal rifts arising within the royal family.There are occasional hints of a potential boycott breakthrough, but a resolution stilllooks unlikely.Qatar’s diplomatic balancing act may become more difficult if US-Iran tensions heat upand if the US designates the Muslim Brotherhood as a terrorist group.

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Business Cost of Organised Crime, 2019

Source: World Economic Forum, 'Global Competitiveness Report'

Note: 1.0 = highest cost imposed, 7.0 = lowest cost imposed



The World Economic Forum’s Global Competitiveness Report 2019 highlighted that Qatar scored100 (out of a maximum of 100) in terms of terrorism incidence: it has experienced no terroristincidents. However, we would advise that there is a potential for lone-wolf terrorist incidents,which, if they did occur, could target Western interests. With respect to the business costs of crimeand violence, the same report gave Qatar a score of 5.7 (out a maximum of 7), and ranked Qatar23rd (out of 141 countries).

Level of National Grievance, 2020

Source: Fund for Peace, 'Fragile States Index'

Note: 1.0 = lowest grievance, 10.0 = highest grievance

Despite the ongoing regional boycott, there is little evidence of national grievance within Qatar. Infact, the boycott appears to have rallied local support behind the emir. A cabinet reshuffle inNovember 2018 seemed to demonstrate the emir’s confidence, as he removed some influentialolder figures and promoted a younger generation of royals and a number of technocrats. Thisconfidence was further demonstrated in October 2019, when initial serious steps were takentowards arranging elections for the Advisory Council, mandated under the 2004 Constitution, butrepeatedly postponed. Although the Council has little real power, this will provide some outlet forpopular empowerment and further reduce the risk of national grievance.


Be prepared for the boycott to remain in place long term, including when makingstaffing and investment decisions.Equally, be prepared for opportunities should the boycott be lifted.Establish relations with newly appointed officials, such as the new minister forcommerce and industry, Ali al-Kuwari.Factor in a possible increase in anti-Western sentiment, which could be directed atcommercial interests should Qatar be used as a military hub.

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EXPROPRIATION / NATIONALISATION RISK

Where property or economic interests have to be expropriated by the state, the process is governedby Article 8 of Law no. 13/2000. This law states that expropriation can only take place when it isin the public interest and must be implemented in a non-discriminatory manner, which providesprompt and fair compensation. The size of this compensation must equal the market value of theexpropriated investment at the time of the expropriation.


Expropriation/nationalisation risk is minimal in Qatar; the last occurrence was in the1970s, involving Shell and Dukhan Services, and rapid compensation was paid.The authorities often choose not to announce that a firm has become insolvent; it cantherefore be difficult to know the full financial circumstances of local counterparts.The impact of wasta (personal and political connections) means that transparency isoften limited, and this is a significant commercial risk.

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Foreign Direct Investment

Source: UNCTAD

According to the latest figures available from the United Nations Conference on Trade andDevelopment (UNCTAD), stocks of FDI in Qatar reached USD32.7bn by end-2018, with inflowpeaking at USD8.1bn in 2009 during the previous LNG expansion programme. However, netinflow has been much lower in recent years, averaging just USD0.2bn in 2014-18. The recenttrade boycott imposed by Qatar’s neighbours is likely to impair the country’s ability to attracthigher levels of investment, although a new foreign investment law and the ongoing infrastructuredevelopment programme should ensure an adequate level of inflow.

Efficiency of Legal System in Challenging Government Regulations, 2019


Note: 1 = extremely inefficient, 7 = highly efficient



The effectiveness of the Qatari government’s policy of treating foreign and local investors equallycan at least partly be measured by Qatar’s adherence to the rule of law. According to the WorldBank’s 2018 Worldwide Governance Indicators , Qatar scored +0.7 (on a scale where +2.5represents better governance and -2.5 poorer governance). At a regional level, Qatar wasconsidered to have a better record on the rule of law than seen in all the other GCC states, exceptfor the UAE (+0.8).


Be confident that should any issues relating to expropriation and/or nationalisationarise, they will be dealt with quickly by the Qatari authorities.Be prepared for competitors to influence regulations, standards and licensing, and forinformal pressure where a local competitor is trying to gain market share.Factor into corporate planning the fact that parts of Qatar’s bankruptcy law remainuntested; a reflection of the secrecy surrounding insolvency in the country.

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PERSPECTIVES

The following sections provide an overview of the broader/longer-term factors that influence theway business is done in Qatar. These factors provide the foundations upon which the economy isbuilt and the framework within which business is done, and give a richer insight into thebackground influences that lie beyond the raw data and focused information that is suppliedelsewhere in the report.

THE ECONOMY

Economic Overview

Qatar’s economy remains dependent on hydrocarbon revenues and government spending of theserevenues; indeed, it is the GCC country that most depends on its hydrocarbon earnings, whichstem from crude and refined oil, natural gas and LNG. The recent trade embargo imposed onQatar by its neighbours has not affected the oil and gas sector, and is not expected to do so.

Hydrocarbons account for more than 70.0% of total government revenue, more than 60.0% ofGDP and roughly 85.0% of export earnings. Qatar has the third-largest natural gas reserves in theworld, at 25.0trn cubic metres, 12.0% of total world reserves. The government considers LNG thebasis for Qatar’s future economic development, and has increased marketed productionsignificantly. Proven oil reserves of 24.7bn barrels should ensure continued output at current levelsfor around four decades, although significant investment will be needed to sustain output fromQatar’s ageing oil fields. Most of the oil produced is available for export. Longer-term goalsinclude developing the offshore petroleum industry and diversifying the economy.

The government’s dominance of the economy represents a structural problem. The primaryhydrocarbon companies are state-owned, while key players in the non-oil sector have significantgovernment ownership. This is unlikely to change in the short to medium term; thus, the state willremain the primary engine of economic growth. Domestic demand is almost entirely reliant on thegovernment’s spending of hydrocarbon revenue earnings, since they pay for public-sector wages(more than 75% of Qatari nationals are employed by the state) and contracts to the private sector.

Economic Framework

Industrial Relations and the Labour MarketIndustrial Relations and the Labour Market

The government pursues a programme of ‘Qatarisation’, under which all joint-venture industriesand government departments strive to move Qatari nationals into positions of greater authority.The role of expatriates is still vital to the economy, but in order to control the influx of expatriateworkers, Qatar has tightened the administration of its foreign manpower programmes. However,it may have to relax these should the political spat with its neighbours persist for too long, sincethe status of Egyptians in particular has become uncertain. Should Egyptians be forced to leave(which we believe unlikely), Qatar will need to source those skills from elsewhere, as the domesticlabour market will be unable to provide them.

The sponsorship system, under which foreign workers must be sponsored by either localcompanies or individual Qatari nationals, is still in place, although growing international scrutinyover the rights of labourers, most of whom are contracted to build World-Cup-relatedinfrastructure, has prompted the government to pledge to overhaul the whole labour system; thisprocess is ongoing, with new initiatives announced intermittently. There is no minimum wage andemployment rules are generally flexible. Strikes are forbidden in vital industries, including oil andgas, water, and power. All workers have the right to conduct collective negotiations over all work-related issues through the formation of joint committees that include employers.

Fiscal FrameworkFiscal Framework

The government publishes a budget for each fiscal year, but there is relatively little informationavailable about the budgetary process, apart from its basic features laid out in the constitution.Historically, the budget ran from April to March, but from January 2016, the budget moved to acalendar-year cycle. The government’s budgets have not fully reflected the significant stateexpenditure in strategic sectors and, although some data is published, this fails to meetinternational standards of transparency.



That said, high budget surpluses have allowed the government to build sizeable sovereign wealthfunds. No official details of the size of these balances are released, but they are estimated by theSovereign Wealth Fund Institute at USD295.2bn. Weaker oil prices pushed the fiscal account intodeficit in 2015, for the first time in 15 years, but it returned to a surplus in 2018.

Monetary and Exchange Rate RegimeMonetary and Exchange Rate Regime

The main aim of the government’s monetary and exchange rate regime is to maintain the fixedexchange rate between the Qatari riyal and the US dollar. The rate was fixed at QAR3.64:USD inJune 1980 and has not been altered since. The Qatari riyal is allowed to float freely against allother currencies. As the vast majority of Qatar’s exports are priced in US dollars, the advantage ofthe peg is currency stability; disadvantages include the loss of monetary policy independence. Inaddition, fluctuations in the value of the US dollar can create significant disparities betweenQatar’s export earnings and its import bill. If the US dollar weakens against other majorcurrencies, Qatar’s terms of trade deteriorate. However, the government is committed to thedefence of the pegged rate, as demonstrated by its draw-down on reserves to support the riyalwhen it temporarily weakened in 2017 as a result of the regional boycott.

Export Profile

Natural gas and crude oil account for the vast majority of Qatar’s exports. The country’s energyresources also play a role in most of its remaining exports. The dominance of gas and oil isunlikely to change in the short to medium term. The main customers for Qatari gas and oil areAsian countries, notably Japan and South Korea. The regional Arab market and Europe havebecome more important as gas markets for Qatar. However, Asia will continue to be the mainmarket for exports in the medium term. This market will be strengthened by a number of free-trade agreements (FTAs) and by a series of deals with China to provide LNG. Strong demand inAsia pushed spot LNG prices to a four-year high in 2018. However, US shale gas is emerging as aglobal commercial force, and Australia is also significantly increasing production of LNG, whichwhen combined with the collapse in demand because of the coronavirus pandemic means pricesare currently at record lows. The regional trade embargo has not affected Qatar’s oil and gasexports, although the costs of non-oil exports may be slightly higher.

Export Mix (Top 5)

Source: Comtrade/Dun & Bradstreet



Export Markets (Top 5)

Source: IMF DOTS/Dun & Bradstreet

Import Profile

Imports are necessary to satisfy almost all of Qatar’s needs, with the important exception of fueland other petroleum derivatives, and a limited amount of food produce. Domestic industry isgrowing rapidly, but is confined to energy-intensive sectors, such as chemicals and plasticsproduction for export, and is still relatively small. Irrigation-fed agriculture has been developed,but Qatar’s desert topography is a hindrance, requiring the country to rely on imports for almostall its food needs. In addition, Qatar’s import bill is rising rapidly, as demand for constructionmaterials and other inputs related to the huge infrastructure programme rises. The regional tradeboycott has required Qatar to re-route its supply chains and source a wide range of imports fromdifferent suppliers.

In general, imports are sourced both from developed countries, such as the US and the UK, andprior to the trade boycott, from its neighbours, including Saudi Arabia and the UAE. Both thesecountries have cut trade ties entirely. In the longer term, Qatar’s import profile is likely to show agreater reliance on Asian as well as Arab countries, reflecting the impact of a number of FTAs.

Import Mix (Top 5)

Source: Comtrade/Dun & Bradstreet



Import Sources (Top 5)

Source: IMF DOTS/Dun & Bradstreet



POLITICS

Qatar achieved independence in 1971 amid an atmosphere of co-operation with the UK andfriendship with neighbouring states. In 1995, Sheikh Hamad bin Khalifa Al Thani succeeded hisfather in a bloodless coup supported by the majority of the royal family. Unlike his father, Hamadhad a vision of a modern and open society, with a controlled degree of popular participation inpolitics. He adopted the policy of limited democratisation, not in response to calls for democracyfrom within the country, but primarily in response to the changing international environment.However, this never sat well with Qatar’s GCC partners, and relations with key neighbours suchas Saudi Arabia and the UAE have never been close. Hamad’s progressive political outlook wasprobably behind his decision to abdicate in June 2013, in favour of his (then) 33-year-old sonSheikh Tamim bin Hamad Al Thani. The move was also designed to cement political stability anddispel any uncertainty over the succession; however, it has served to create further politicaldivisions among Qatar’s GCC partners, in part reflected in their imposition of a trade anddiplomatic boycott on Qatar in June 2017.

Constitutional Arrangements

Under the 2005 constitution, Qatar is a constitutional hereditary monarchy, with the emir as itshead of state. The right to rule remains within the Al Thani family, more specifically among themale successors of Sheikh Hamad. So far, Sheikh Tamim has not appointed a crown prince (theeldest of his three sons is five years old); the heir apparent is not necessarily the eldest son, but ischosen by the emir from among his sons. If there is no male offspring, the succession can betransferred outside the immediate family, according to the emir’s choice, and the crown will thenbe inherited by the appointed heir’s successors.

The 2005 constitution was designed to clearly delineate the powers between the executive,legislature and judiciary, and to usher in greater representation and accountability into publicaffairs. However, it has yet to be fully implemented, and, until such time, ultimate political powerstill rests with the emir and his cabinet.

ExecutiveExecutive

The emir has wide-ranging powers that give him the authority to formulate government policy,issue and endorse legislation, appoint all civil and military personnel, establish ministries andother government agencies, as well as executive consultative and advisory bodies, and morebroadly ‘any other powers in accordance with this constitution and the law’. This includes thepower to veto legislation, as well as the right to dissolve parliament. These latter clauses ensurethat ultimate political authority remains in the hands of the emir and the wider royal family.However, the emir cannot violate Sharia (Islamic law), and in practice he consults widely,considering the opinions of leading families and the religious establishment.

LegislatureLegislature

The first elections for the Advisory Council, mandated in the constitution, have been repeatedlyannounced and then postponed. However, the most recent announcement, in October 2019, seemsmore serious and a committee has been formed to draw up constituencies and draft an electorallaw, with elections likely in spring 2021. According to the constitution, 30 of the 45 members ofthe consultative assembly will be elected, and the emir will continue to appoint the remaining 15.Membership of the assembly will be for six years. Although the election will do little to challengethe power structures within the state, the move is a further act of defiance against Saudi Arabia,which has been forceful in dissuading its GCC partners against any form of democraticliberalisation, for fear of encouraging it within the Kingdom.

Political Parties

Political parties are banned.

Head of State: Sheikh Tamim bin Hamad Al Thani was born in 1980. The fourth child of SheikhHamad and Sheikha Mozah bint Nasser Al Misnad, he acceded to the throne in 2013 at the age of33. Like his father, he is a graduate of the Royal Military Academy at Sandhurst in the UK.He became crown prince in 2003, replacing his brother, Sheikh Jassim bin Hamad Al Thani.



From 2003, he was increasingly exposed to key institutions of state and assumed a growing role inpolicy-making. His numerous posts include: deputy commander in chief of the Qatari armedforces; head of the supreme oversight committee for implementing Qatar’s National Vision 2030;chairman of the supreme education council; and chairman of the Qatar Investment Authority(QIA). He was also given an increasingly prominent diplomatic role, including representing Qatarat the 2012 GCC summit (an annual gathering of regional heads of state).

His experience suggests that he will have been closely involved behind the scenes in all majorpolicy decisions in recent years; as a result, there has been little change to the direction of policy.Indeed, in his first address as head of state, Sheikh Tamim vowed to pursue his father’s path andintimated that he would remain committed to the broad goals of infrastructure development,diversification away from oil and gas and the development of Doha as an international financialcentre. He also stressed the need to boost the productivity of Qatari nationals, a clear indicationthat his government will continue to focus on enhancing the skills of the national workforce andencouraging their participation in the private sector.

Thus far, he has introduced no major policy changes, having been preoccupied with his father’slegacy, especially Qatar’s support for the Muslim Brotherhood and the hosting of the 2022 FIFAWorld Cup, both of which have tested foreign relations.

Prime Minister and Interior Minister: Sheikh Abdullah bin Nasser bin Khalifa Al Thani wasappointed prime minister by Sheikh Tamim in 2019, and is also interior minister. He has a strongmilitary and security background, having also run the internal state security organ and anti-terrorism division.

Interest Groups

The Al Thani FamilyThe Al Thani Family

The right of the Al Thani family to rule Qatar has been established over time, based on anunwritten social contract, and was enshrined within the constitution in 2005. In return for theright to rule, the Al Thani family ensures the economic well-being of its subjects through theredistribution of wealth from the country’s resources. This contract is the basis for the high degreeof state involvement in the economy. It also underpins the reluctance of the ruling family to divestcontrol of key assets or services, as this would equate to relinquishing political control. The policyof increasing political freedom must be seen within the context of regime security. From time totime, peripheral members of the Al Thani family emerge to criticise the ruling branch of the familyand to set themselves up as legitimate successors. They are not taken seriously in Qatar and poseno threat.

Merchant FamiliesMerchant Families

The private sector is dominated by a number of large, long-established merchant families. BeforeQatar enjoyed the benefits of hydrocarbon revenues, these trading families provided the necessaryfinance for the royal family. They are extremely loyal to the ruling family, and this is rewardedwith protection of their business interests, as well as appointments to senior public positions. Theslow pace of economic reform stems in part from the need to protect the interests of these familiesand allow them time to adapt to new commercial pressures.

ExpatriatesExpatriates

Foreign workers account for roughly 85% of Qatar’s population and more than 90% of theworkforce. Blue-collar workers come mainly from East Asia, whereas skilled workers, such asengineers and accountants, come from the wider Middle East and the Indian subcontinent.Managerial and highly skilled employees generally come from North America and WesternEurope. Expatriates are attracted by generous salaries and benefits. The presence of a largenumber of expatriates has not created the friction seen in other Middle Eastern countries, such asBahrain and Saudi Arabia. Expatriates take jobs that the Qataris could perform but choose not to,as well as jobs that Qataris are unable to fulfil. Nevertheless, expatriates are expected to besensitive to religious and social codes of behaviour; those who transgress these codes can betreated severely.



International Environment

Arab states, along with the UK and the US, were among the first countries to recognise Qatarwhen it became independent, and the country promptly gained admittance to the UN and theArab League. Since 1996, Qatar has been a member of the WTO, making its trade regime moretransparent and more accommodating to non-resident businesses. Qatar is also a member of tworegional free-trade areas: the Pan-Arab Free Trade Area (PAFTA) and the Gulf Co-operationCouncil (GCC). It is also a member of OPEC. Qatar has a number of FTAs to which it iscommitted as part of the GCC, as well as separate bilateral trade agreements.

Relations with the USRelations with the US

Qatar maintains close relations with the US. Indeed, with the siting of key US military bases inQatar, the emirate is seen as one of the US’s most loyal allies in the region. Qatar’s strongrelations with the US have served it well in its recent spat with its neighbours, with the USshowing solidarity. Although the presence of such a large US military contingent in Qatarobviously gives significant security guarantees to the country, it also raises the risk of the emiratebecoming entangled in US foreign policy disputes in the region, particularly with Iran. Given thatQatar’s security arrangements with the US potentially place it on the front line should such aconflict break out, Qatar maintains an open dialogue with Iran, although it temporarilydowngraded diplomatic relations in 2016 in response to an attack on the Saudi embassy in Iran.However, this situation was reversed following the regional embargo, which means that Qatar isnow reliant on Iran, particularly for access to airspace. This closer relationship with Iran isawkward in view of the uptick in US-Iran tension since 2019.

Relations with the Middle EastRelations with the Middle East

Since the Arab Spring in 2011, Qatar has embarked on a campaign of foreign adventurism. It hassupported Islamist groups across the region, most notably in Libya, Egypt and Syria. The movewas designed to back future winners and gain greater political leverage throughout the region,more than to aid the spread of Islamist ideology. But in any case, in each instance, Qatar’s effortshave been to little avail, with their Islamist clients in the various countries failing to make good ontheir political gains. Furthermore, Qatar’s foreign policy has raised the ire of its Gulf neighbours,to the extent that in March 2014, three Gulf countries (Saudi Arabia, the UAE and Bahrain) allwithdrew their ambassadors to Doha. Despite a supposed resolution to the dispute, whichrequired Qatar to adopt a more communal policy position, and resulted in the return of theambassadors in December 2014, Qatar still sought to maintain its independence, while trying topacify relations within the GCC. However, in June 2017, this policy was shown to have failedwhen the same GCC neighbours, as well as Egypt, cut diplomatic and trade relations withQatar because of persistent concerns over Qatar’s foreign policies.

FIFA World CupFIFA World Cup

Qatar’s successful bid to host the 2022 FIFA World Cup has come under close internationalscrutiny, with allegations emerging that the bid was secured through corrupt practices. Qatarwas exonerated of such practices by a FIFA report issued in November 2014, but remains in thespotlight over the event because of persistent concerns over labour rights.



COMMERCIAL CULTURE

Despite the government having taken steps to make it easier for the private sector to participate inthe state’s ambitious economic expansion plans, and for non-residents to trade and invest, Qatar’srelative competitiveness has been decreasing in recent years. In the World Economic Forum’sGlobal Competitiveness Report 2012, Qatar was ranked 11th out of 144 countries. By 2019, itsranking had slipped to 29th out of the 140 countries surveyed. The sharp decline in recent years ispartly due to the plunge in the oil price since end-2014, as well as methodological changes withthe index. For its part, the World Bank has indicated in its Doing Business 2020 report that thereare concerns about starting a business, getting credit, protecting investors and enforcing contractsin Qatar. This aside, the regulatory environment is generally favourable, if underdeveloped. Qataris also considerably less corrupt than many of its neighbours. However, the importance of wasta(personal and political connections) should not be underestimated as it creates an uneven playingfield for foreign companies.

Competitiveness, 2019


Note: 0 = least competitive, 100 = most competitive

Infrastructure

As a result of the recycling of Qatar’s oil wealth by the government since the 1950s, the country’sinfrastructure is relatively well developed. There is an excellent network of primary and secondaryroads, linking Doha, the capital, with all major areas. However, congestion is increasingly aproblem and several road and rail projects to further improve transport flow are under way. Ametro network linking all the stadia in Doha should be in place by 2022, in time to host the FIFAWorld Cup. With the rapid rise in the population, major works are also under way to expandutilities services. There are also five airports, including the state-of-the-art King HamadInternational, opened in 2014. There are three ports and harbours (situated at Doha, Halul Islandand Umm Said) as well as the much bigger Hamad Port, which opened in December 2016 and issteadily increasing its capacity. Should the trade embargo on Qatar continue, the country willhave to continue transshipping goods through Oman for the time being, as Hamad Port is stillunable to accommodate the largest container ships.



Legal and Regulatory EnvironmentLegal and Regulatory Environment

Rule of Law, 2018

Source: World Governance Indicators/World Bank

Note: -2.5 = worse performance, +2.5 = better performance

Judicial EnvironmentJudicial Environment

The judiciary is subject to inefficiency and executive influence, and the court system is slow,bureaucratic and biased in favour of Qatari citizens and the government. Contract enforcementcan be a major obstacle. Qatar fares reasonably well, compared with its regional neighbours, withrespect to the rule of law. Expropriation risk is low.

Qatar was dropped from the US Trade Representative’s Priority Watch List for intellectualproperty rights (IPR) infringements in 2003, in recognition of the passage of draft laws, and hasremained off the list since then due to successful raids, seizures of material and prosecution ofviolators of IPR. IT piracy has decreased as a result.

Enforcement of Contracts / ArbitrationEnforcement of Contracts / Arbitration

Enforcing Contracts, 2020

Source: World Bank ‘Doing Business Report’

Ranking: Low score = best, High score = worst

According to the World Bank’s Doing Business 2020 report, Qatar is ranked 115th out of 191countries in terms of enforcing contracts, highlighting the limited legal redress foreign companiesmight experience. It takes 570 days to process a claim, at a cost of 22% of the total claim. Qatarscores just 4.5 out of 18 for quality of judicial processes.



Bankruptcy and InsolvencyBankruptcy and Insolvency

Recovery Rate, 2020

Source: World Bank, 'Doing Business Report'

Qatar’s 2006 companies law contains provisions for bankruptcy. According to the World Bank,the time taken to resolve bankruptcy is below the regional average, but higher than the OECDaverage. The recovery rate is quite high in comparison with the regional average, although belowthe OECD average. Meanwhile, the cost of insolvency, although not overly prohibitive, exceedsthe regional and OECD averages. There is considerable social stigma attached to bankruptcy, andbusinesses and individuals will go to considerable lengths to avoid it. Since many private-sectorbusinesses are family owned, they can usually call on the resources of the extended family toovercome cash-flow difficulties. In addition, the small size of the business community in Qatarmeans that companies usually have a close personal relationship with their bank, and thisgoodwill can be called on at times of difficulty. There is a growing understanding of the benefits ofhaving transparent and robust bankruptcy regulations in place in order to support anentrepreneurial culture and, as a result, new bankruptcy provisions are currently under discussion.

Corporate GovernanceCorporate Governance

The main ways for foreign investors to operate in Qatar are: to establish a wholly owned branchof a foreign company, which requires approval from the cabinet; to establish a limited liabilitycompany with a Qatari partner, where there is a ceiling of 49% foreign ownership; to establish ajoint venture with a Qatari partner, with a ceiling of 49% for any foreign investment; or toestablish a business through a joint venture (most non-residents establish a business in this way,which requires a domestic representative). Agents, sponsors, distributors or intended joint-venturepartners often provide advice on setting up a new business.

CorruptionCorruption

There is a risk, albeit diminishing, that firms operating in Qatar will encounter unethical practices.There is a lack of adequate safeguards against conflicts of interest, little transparency in decision-making and few effective checks on the government, creating conditions in which corruptpractices can occur. In addition, the small size of and close connections between the political andbusiness elite lead to suspicion of corrupt practices. However, the government has embarked on amajor initiative to combat corruption in government procurement. Several cases of allegedcorruption at various government entities have been investigated.

SanctionsSanctions

There are currently no known international sanctions against Qatar; however, as of June 2017,Qatar’s neighbours, Saudi Arabia and the UAE, as well as Egypt and a number of other smallercountries, imposed a transport and trade boycott on Qatar, resulting in the closure of mutualborders and the total cessation of air travel, exports and imports.



STATISTICAL REFERENCE

Key Indicators and ForecastsKey Indicators and Forecasts

Historical Data

Metric 2016 2017 2018 2019 2020f

Real GDP growth (%) 3.1 -1.5 1.2 0.8 -2.7

Nominal GDP in USDbn 152 161 183 176 167

Nominal GDP in local currency (bn) 552 586 667 640 607

GDP per Capita in USD 57,163 61,961 65,908 62,088 57,859

Population (year-end, m) 2.7 2.6 2.8 2.8 2.9

Exchange rate (yr avge, USD-LCU) 3.6 3.6 3.6 3.6 3.6

Current Account in USDbn -8.3 6.4 16.7 4.2 -12.2

Current Account (% of GDP) -5.5 4.0 9.1 2.4 -7.3

FX reserves (year-end, USDbn) 30.8 13.8 29.1 37.7 35.4

Import Cover (months) 5.8 2.7 5.3 6.8 6.1

Inflation (annual avge, %) 2.3 0.3 0.1 -0.9 -2.5

Govt Balance (% GDP) -9.2 -6.6 2.2 1.0 -7.2


Forecasts

Metric 2021f 2022f 2023f 2024f 2025f

Real GDP growth (%) 1.9 3.5 1.8 2.0 1.5

Nominal GDP in USDbn 172 183 185 190 194

Nominal GDP in local currency (bn) 627 668 675 691 705

GDP per Capita in USD 58,816 61,543 61,213 61,714 62,036

Population (year-end, m) 2.9 3.0 3.0 3.1 3.1

Exchange rate (yr avge, USD-LCU) 3.6 3.6 3.6 3.6 3.6

Current Account in USDbn 2.6 5.9 8.0 8.0 8.3

Current Account (% of GDP) 1.5 3.2 4.3 4.2 4.3

FX reserves (year-end, USDbn) 36.5 37.2 37.9 38.7 39.5

Import Cover (months) 5.9 5.8 5.6 5.4 5.3

Inflation (annual avge, %) 1.5 2.9 -0.7 0.4 0.5

Govt Balance (% GDP) -1.8 0.3 1.4 2.3 1.9


Comparative Market Indicators

Indicator Qatar Bahrain Kuwait S. Arabia UAE

Income per Capita (USD) 57,859 20,457 23,924 18,934 37,600

Country Population (m) 2.9 1.7 4.3 34.8 9.9

Internet users (% of population) 99.7 98.6 99.6 93.3 98.5

Real GDP Growth (% p.a., 2021 - 2030) 2.5 - 4.5 1.0 - 3.0 1.5 - 3.5 1.0 - 3.5 2.0 - 4.0

Source: Various sources/Dun & Bradstreet



USER GUIDE

Ratings and IndicatorsRatings and Indicators

Traffic Light System

The traffic light system used in this report gives you a speedy way of assessing the balance of risksand opportunities in a given country or category of analysis for that country. Three traffic lightsare used:

Green: indicates that positive factors/influences dominate.

Amber: indicates that there is a balanced mixture ofnegative/positive factors/influences.

Red: indicates that negative factors/influences dominate.

The traffic light indicators act as a quick guide to the overall balance between the detailedanalytical components covered elsewhere in the report. This allows you to rapidly identify areas ofconcern or promise, which you can then explore further, either elsewhere in the report or via thecontent of theother products in our portfolio. You should always use the more detailed analysis asthe basis for any further investigation/assessment/decision-making.

Dun & Bradstreet Risk Indicator

Dun & Bradstreet’s Country Risk Indicator provides a comparative, cross-border assessment of the riskof doing business in a country. The risk indicator is divided into seven bands, ranging from DB1 toDB7. Each band is subdivided into quartiles (a-d), with ‘a’ representing slightly less risk than ‘b’ (and soon). Only the DB7 indicator is not divided into quartiles.

The individual DB risk indicators denote the following degrees of risk:

DB1 LowestRisk

Lowest degree of uncertainty associated with expected returns, such as exportpayments and foreign debt and equity servicing.

DB2 Low Risk Low degree of uncertainty associated with expected returns. However, country-wide factors may result in higher volatility of returns at a future date.

DB3 SlightRisk

Enough uncertainty over expected returns to warrant close monitoring ofcountry risk. Customers should actively manage their risk exposures.

DB4 ModerateRisk

Significant uncertainty over expected returns. Risk-averse customers areadvised to protect against potential losses.

DB5 HighRisk

Considerable uncertainty associated with expected returns. Businesses areadvised to limit their exposure and/or select high-return transactions only.

DB6 VeryHighRisk

Expected returns subject to large degree of volatility. A very high expectedreturn is required to compensate for the additional risk or the cost of hedgingsuch risk.

DB7 HighestRisk

Returns are almost impossible to predict with any accuracy. Businessinfrastructure has, in effect, broken down.



HEADLINE CATEGORY DESCRIPTIONS

These headline categories combine the analysis from a number of detailed sub-categories in order toprovide focused insight for business-critical issues.

Credit Environment Outlook

This category assesses the factors that affect the country’s credit environment, and helps cross-border traders and investors understand the level of risk related to non-payment or delayedpayment.

Supply Environment Outlook

This category covers the factors that could disrupt supply chains associated with the country, thusallowing cross-border traders and investors to assess risks in this area.

Market Environment Outlook

This category provides an assessment of the factors affecting the market environment over theshort-to long-term; this assessment will help businesses involved in cross-border trade and/orinvestment to make informed decisions about increasing, maintaining or decreasing business linksin a country.

Political Environment Outlook

This category helps cross-border traders and investors to understand the risks associated withexpropriation/nationalisation, and also takes account of intentional human actions that couldaffect the quality of the business environment.

DETAILED ANALYTICAL CATEGORY DESCRIPTIONS

These analytical categories provide our most detailed, in-depth coverage of the core components ofrisks and opportunities associated with a given country. Together, they embody our broadest,deepest assessment of a country’s risk and opportunity environment.

Short-term Economic Outlook

Analyses the economy/business cycle over the next 2-8 quarters, identifying recession, recovery,growth or stagnation. Helps businesses anticipate the impact of short-term developments in thesphere of aggregate supply and demand.

Long-term Economic Potential

Assesses long-term economic prospects over the next 5-15 years on the basis of trends in thephysical environment, natural and human capital, and demographics and labour supply. Helpsbusinesses foresee the long-term impacts on market potential of factors such as ageing, resourcedepletion and innovation.

Market Potential

Covers the ability of foreign providers of goods and services to access a target country’s markets.This helps businesses understand the practical and regulatory barriers, as well as incentives andopportunities.

FX Risk

Looks at the risk of lack of FX, significant devaluation or depreciation, or any instability of theexchange rate over the next 90-180 days. This helps businesses anticipate the pressures facingcustomers billed in foreign currency, or the risks if their receivables are in local currency.

Transfer Risk

Covers the risk of existing or new regulations, requirements or other government actionspreventing, delaying or burdening cross-border transactions. This helps businesses to anticipaterisks related to cross-border payments arising from the regulatory environment.



Business Regulatory Environment

Assesses the risks and opportunities in the business environment associated with regulations,institutions and business culture. This helps businesses assess how intangible aspects of thebusiness environment can facilitate business operations or otherwise.

Business Continuity

This category looks at factors that could affect the physical supply chain due to the effects ofnatural phenomena or other unintended consequences. This helps businesses anticipate thelikely/current impacts of extreme weather, seismic activity and inadequate/improvedinfrastructure.

Political / Insecurity Risk

This covers the risk of disruption of business operations and the services of a functioning economydue to the negative effects of intentional human action on civil peace and internal/cross-bordersecurity. This helps businesses to understand the context and risk spectrum for threats arisingfrom social and political disturbances.

Expropriation / Nationalisation Risk

This category assesses the risk of forcible/compulsory, full/partial loss of control or ownership ofassets at the hands of a sovereign government, and whether or not there is compensation orjudicial redress. This helps businesses understand the country’s track record in this respect andhighlights the risks posed by acts of expropriation/nationalisation.



LINKS

User Guide

Please click here to visit our online user guide.

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Whilst Dun & Bradstreet attempts to ensure that the information provided in our country reportsis as accurate and complete as possible, the quantity of detailed information used and the fact thatsome of the information (which cannot always be verified or validated) is supplied by third partiesand sources not controlled by Dun & Bradstreet means that we cannot always guarantee theaccuracy, completeness or originality of the information in some reports, and we are therefore notresponsible for any errors or omissions in those reports. The recipients of these reports areresponsible for determining whether the information contained therein is sufficient for use andshall use their own skill and judgement when choosing to rely upon the reports.

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