During the lockdowns necessitated by the Covid-19 pandemic in 2020-21, individuals who stayed employed were able to boost their savings – this was the trend of the ‘accidental saver’. Vacations, meals out and other entertainments were either barred or curtailed, so people could top up their pensions and other savings plans. In addition, some people were uncertain about their job prospects, so tended to save rather than spend.
Since the pandemic ended, spending naturally increased, and in the particular case of Qatar, the FIFA World Cup in 2022 provided an extra economic stimulus.
Given this, and given that wages have not increased significantly, one may have expected the savings rate to decline, but instead it has edged upwards. Qatar has a low-cash, highly banked populace, so banking deposits represent a reliable gauge to the savings rate. Data for May 2023 shows that aggregate personal savings have risen to more than QR237bn, from just over QR220bn two years earlier, which was during the pandemic. The longer-term trend has been remarkably consistent, with aggregate savings rising continually in the period 2018-2023. There is a significant amount of savings in foreign currencies, around QR21bn, or $5.7bn.
Fortunately, this does not reflect a fall in consumer spending, although it does raise policy issues around the optimal balance of spending and saving.
The most recent Mastercard Economics Institute annual report on consumer spending, published in December 2022 reported that discretionary spending had increased in Qatar. Intriguingly, it had increased almost as much for lower-income households as for affluent individuals, bucking an international trend. Probably, this reflects the impact of the World Cup in November and December 2022, but there are indications that spending and economic activity, while naturally registering something of a lull after the tournament, have not collapsed.
One of the most encouraging statistics has been that tourism has continued its growth in 2023. Official figures from the Planning and Statistics Authority showed that there were more than 285,000 visitors in May 2023, which was 72% higher than the previous year. Visitors from other Gulf Co-operation Council countries made up 37% of the arrivals.
Tourism, along with the knowledge economy, has been identified in government strategy as target sectors for growth as part of diversification of the economy. An increase in the savings rate boosts the potential for investment in these areas. But people tend to keep money in low-risk savings accounts, rather than spend or invest, if economic confidence is low.
There is a need for an optimal balance of spending and saving, and to encourage investment. One area where there is limited data is in the savings patterns of expatriate workers, who make up the majority of Qatar’s population. It is inevitable that a significant proportion of the income of expats will be remitted home to their families, especially those who come from low-income regions, but there may be ways to encourage more spending and saving in the local economy.
An initiative that was launched last year by the United Arab Emirates is a pension scheme, which is open to all, but particularly aimed at expats. The Golden Pension Scheme is run by National Bonds, a savings and investment company set up by the Investment Corporation of Dubai. Companies can sign up their employees for the retirement plans. The scheme issues sukuks, which are Shariah-compliant savings bonds, to which individuals can top up with monthly contributions. The scheme is complementary to the long-established gratuity system for expats in Gulf nations, which offers them a lump sum at the end of their tenure. A pension scheme for expats holds the potential both to retain more wealth within the local economy, and to boost capital for investment.
An increasing savings rate is not, in itself, a positive or a negative development for an economy. What is of more importance is encouraging a healthy dynamic such that the patterns of spending, saving and investment support the development of a diversified economy.
The author is a Qatari banker, with many years of experience in the banking sector in senior positions.