The Institute of International Finance (IIF), the US-based economic think-tank, has revised down Qatar's real growth this year in view of the global pandemic Covid-19; but held that Doha's inflation-adjusted economic expansion will be better than the world and the Middle East and North Africa (Mena) average.
The IIF has now pegged Qatar's real gross domestic product (GDP) growth at 0.4% in 2020 against the previous estimate of 2.6% for the same year.
In comparison, the world average growth is slated to be (-) 1.5% compared to 2.6% and the Mena region's average of (-) 0.3% against 1.8%. The Gulf Co-operation Council exporters' real growth is revised down to 0.6% against the previous estimate of 2.2%.
The mature economies' growth has been revised down to (-) 3.3% against the previous estimate of 1.5% with the US and euro region likely to register (-) 2.8% and (-) 4.7% growth compared to 2% and 1.2% respectively.
The IIF highlighted that the Qatar government announced a three-year stimulus package of $20.6bn (12.5% of GDP) to the private sector to mitigate the effects of the spread of the coronavirus. This also includes the capital infusion into the Qatar Stock Exchange.
The Qatar Central Bank lowered the lending rate by 100bps (basis points) to 2.5% and reduced the repurchase rate (repo) by 50bps to 1%. It will provide additional liquidity to local banks and set up a mechanism to encourage banks to postpone private sector loan repayments for six months.
The International Monetary Fund (IMF) has taken note of Qatar’s targeted measures aimed at supporting the private sector in view of the Covid-19 crisis and said governments in the region should consider providing temporary fiscal support to affected households and businesses.
Quarantines, disruption in supply chains, the crash in oil prices in light of the breakdown of Opec+, travel restrictions, and business closings point to a recession in the Mena region, the first in three decades, the IIF said, adding all hydrocarbon exporters are likely to record large fiscal deficits due to the collapse in oil revenue, leading to a rise in public debt.
"Uncertainty is high regarding the duration of the shutdown and the scope for an additional fall on oil prices," IIF chief economist Garbis Iradian said about the overall scenario in the Mena region.
Based on its baseline scenario of an average oil price of $40 for a barrel, the nine Mena oil exporters would see a fall in hydrocarbon earnings of $192bn (11% of GDP) in 2020.
Consequently, the cumulative current account balance would shift from $65bn surplus in 2019 to $67bn deficit this year, and the fiscal deficit would widen from 2.9% of GDP to 9.1%.
Non-resident capital flows to the Mena region are expected to decrease from $182bn in 2019 to $101bn in 2020, on the back of lower equity and debt flows.
As in 2008 and 2009, resident outflows (mostly in the form of sovereign wealth funds, or SWFs) will also decline sharply (from $215bn in 2019 to $136bn in 2020); reflecting the increasing need to tap SWFs to finance the large deficits, according to the IIF.