Foreign perceptions of Qatar’s financial situation remain "upbeat" in view of the strong demand for its bonds and the non-resident capital inflow will remain "high" around $21bn this year, according to the Washington-based Institute of International Finance (IIF).
Moreover, changing the law to allow foreigners to buy real estate in Qatar and allowing them to own businesses without a local partner will also encourage FDI or foreign direct investment in the non-energy sectors, the IIF said in its latest report.
"The $10bn international bond issuance at favourable terms in April 2020 allowed the government to cover most of its external financing needs. Non-resident capital inflows will remain high around $21bn in 2021, driven by loans to government related-entities and a significant increase in non-resident deposits," it said.
The report also found the relatively low EMBIG (emerging markets bond index) spread of 51bps (basis points) for the Qatari bonds as one of the reasons for the upbeat foreign perceptions.
The resident capital outflows from Qatar will increase to around $26bn, consisting largely of investments by the Qatari sovereign wealth fund in foreign equities, hedge funds, fixed income securities, and minority shares in global companies, it said.
The public foreign assets (official reserves + the foreign assets of the Qatar Investment Authority) will increase to about $362bn (214% of GDP), the report said.
IIF also said the Covid-19 has accelerated the digital transformation that is already underway in Qatar, which has limited the health impact of the pandemic, thanks to its relatively young population and a range of containment measures.
Finding that Qatar’s coronavirus vaccination programme has advanced very quickly in recent months; it said the target to immunise more than half of the residents by June appears in reach.
Regarding the country's digital transformation, the IIF is of the view that Qatar aims to attract more FDI in the non-energy sectors and skilled foreign labour.
The report said improving potential growth would also require far-reaching structural reforms, including simplifying business processes, reducing the regulatory burden, ensuring adequate skill-building that meets the needs of private employers, and more attention to women’s empowerment.
"Such reforms will increase productivity growth and boost the supply of highly qualified labour, which is needed to raise potential growth," IIF said.
In this context, the authorities have recently launched partnerships with the private sector for logistics zones and other infrastructure projects. The government also eased restrictions on foreign investment and looks to attract more tourists by relaxing visa regulations.