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Qatar is a state with the landmass of only 11500 square kilometers located on the peninsula in the Persian Gulf bordering on the UAE. Once been the poorest country in the Gulf region, Qatar takes now the third place out of the fifteen richest states in the Middle East. Its economic freedom is ranked thirty-second with a freedom score 70.8 (The Heritage Foundation, 2015). Qatar has the world’s largest oil and gas reserves of over 15 billion barrels of oil constituting 3.2% of GCC oil reserve (“State of Qatar,” 2015). It is the GCC largest holder of natural gas reserves, taking the third place in the world, supporting the highest income per capita with almost no poverty ($ 98,814 of national income per capita and 0,6% of unemployment rate) (The Heritage Foundation, 2015).
However, economic stability depends much on oil and gas export constituting over 50 % of GDP (The Heritage Foundation, 2015). In 1995, Sheikh Hamad bin Khalifa Al Thani became a ruler with a new direction to democratic freedom and economic development reducing dependence on oil and gas, trying to position Qatar as a future logistics and financial hub (The Heritage Foundation, 2015). The government is committed to extensive spending on infrastructure projects while preparing the country for the 2022 World Cup, exceeding thirty billion dollars in 2014 alone (“Qatar Economic Outlook,” 2015). It is fairly considered as one of the most stable economies among countries in the GCC region, thanks to its combination of essential natural resources and wise economic management.
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Over the past few years, Qatar has experienced a stable economic growth due to upturns in energy prices, increasing demand for oil and gas, and the development of the private sector. From 2003 to 2008, it had the strongest GDP growing to the highest annual level of 41,3% in 2008 in comparison to 24,8% in 2007. However, the world economic recession hit the country as well, so the GDP rate shrank to -16,4% (“State of Qatar,” 2015). After recession, the Qatar economy experienced strong economic recovery, with diversification efforts taken to become a center of international finance, when GDP reached 16.7%, 13.0%, 6.0%, 6.35, and 6.2% in 2010, 2011, 2012, 2013, and 2014 respectively (“Qatar Economic Outlook,” 2015). Analysts predict that the country will continue growing at a strong pace due to its economic diversification program and broad development of infrastructure, despite the pressure on gas and oil prices. Panelists of Focus Economics project the economy growth by 5.1% in 2015 and 5.2% in 2016 (“Qatar Economic Outlook,” 2015).
Before the credit crunch of 2008, Qatar consumer price index had experienced an extraordinary rise due to the booming economy and an increase in consumer confidence and spending. An all-time high rate of inflation reaching 15.1 % in 2008 was caused by increasing property prices supported by U.S. dollar deflation (“State of Qatar,” 2015). After deflation rates of -4.9% and -2.4% in 2009 and 2010 respectively, Qatar inflation index has a stable average of 2% - 3% yearly with increasing consumer confidence and spending and “a large influx of foreign workers involved in the construction sector helping boost domestic demand” (“Qatar Economic Outlook,” 2015).
Despite a decline in oil revenues, the country has a strong fiscal position. A sharp increase in oil prices before 2008 improved government’s fiscal position with 70% of revenue coming from oil and gas export (“State of Qatar,” 2015). Thus, the fiscal buffer built up in the previous year, serves now for funding government’s infrastructure development and economic diversification. Fiscal balance is 15.5% of GDP (“Qatar Economic Outlook,” 2015). “Government expenditures equal 30.6 percent of domestic production, and public debt equals 34 percent of gross domestic product” (The Heritage Foundation, 2015). To escape the dramatic damage caused by the financial and economic crisis of 2008, Qatar took advantage of its vast natural reserves and domestic price pressure “by setting over $300bn of export revenues aside in its growing sovereign wealth funds and managing a proactive interest rate policy” (Anderson, Boxshall, & Bartosek, 2015).
The government uses a fixed exchange rate regime. Officially, the Qatari currency, Riyal (QR), is pegged to the special drawing rights (SDR) at 4.76. In reality, however, QR is pegged to the U.S. dollar (“State of Qatar,” 2015). The current rate has been kept on a relatively stable level since the 1980s being QR 3.64 per USD 1, although U.S. dollar has been depreciated against the euro and the British pound sterling. The main principle of keeping the exchange rate of QR to USD stable is Qatar’s oil and gas exports remaining dominated by U.S. dollars (“State of Qatar,” 2015). International reserves have been increasing steadily to the level of 43.0 billion dollars (“Qatar Economic Outlook,” 2015). According to the Qatar Central Bank, the monetary policy was changed last in August 2011 and remains stable with the following rates: the deposit rate of 0.75%, lending rate of 4.5 % and the repurchase rate of 4.5% (Anderson, Boxshall, & Bartosek, 2015).
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Qatar has the highest income per capita in the GCC region with a high exporting trend of hydrocarbon reserves. High budget surplus was caused by the increasing global demand for oil and gas with the highest level of 33.1 billion dollars (33% of GDP) in 2008 (“State of Qatar,” 2015). Qatar’s budget surplus experienced a decline after 2008, recovering 32.8%, 30.8%, and 25.9% of GDP budget surplus in 2012, 2013 and 2014 respectively, reflecting sustained prices of LNG, crude oil and condensate exports (“Qatar Economic Outlook,” 2015). With active development of the nonhydrocarbon sector of the Qatar economy, the government budget posted large surpluses with 9% of GDP increase in revenues. “The non-oil sector is expected to grow at double-digits rates in the years to come” (“Qatar Economic Outlook,” 2015).
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