Qatar is one of the wealthiest countries in the world in terms of GDP per capita. It's economy is highly dependent on oil and natural gas extraction which accounts for more than 50% of GDP, 85% of export earnings, and 70% of government revenues. Since proven oil and gas reserves are estimated to sustain current production levels only for the medium run, the government has been making new initiatives and efforts to diversify the economy into a sustainable long-term income model.
In this article, we have compiled few information that you need to know about the Economy of Qatar.
Qatar Economy- How It Evolved?
According to Heritage.org, Qatar's economic freedom score is 72.6, which makes it the 28th freest economy in the 2019 index.
As of 2018, it is the second largest exporter of natural gas and has the third’s largest proven natural gas reserve.
Although its economy was on a downfall from 1982 to 1989, it got a boost in 1991 as Phase-1 of North Field Gas development got completed. With this, it also underwent many changes to resonate with the changing world's economy.
Its friendly relations with other countries have also helped its foreign trade exchanges to grow, especially in the Asian markets.
Further, to regulate the momentum of its economic development, the country adopts flexible economic policies that are designed to encourage local and foreign investment. The policies include relief from duties on imported machinery, well-developed infrastructure, and nominal land lease price in the industrial areas. It seems that Qatar economy will grow as the market expands, and the country strives for greater economic autonomy.
Along with this, the Qatar government now focuses on controlled economic growth that suits the size of the country.
Components of Qatar's Economy
In 2017, Qatar's GDP was about US$167 billion. But as per the IMF forecast, it will grow at a 7% annual rate, and will also be boosted by spent done on the 2022 World Cup. Even, the inflation will remain stable and is projected to be a little over 2% over the next five years.
Further, Qatar has invested in natural gas handling facilities, which includes importing natural gas into the US and then exporting the production to other countries. The investment consists of $45 billion in the United States, and will also invest $10 billion in US infrastructure.
Qatari Investment Authority (QIA) is also committed to investing some percentage of the total wealth fund in the U.S. The main purpose of fund and investment in the U.S. is to assure the people of Qatar are protected against future economic shocks if any.
As published in heritage.org, the elements of open markets include:
- The combined value of both import and export is 89.1 percent of GDP.
- The average applied tariff rate is 3.4 percent, but as of 2018, there were two non-tariff measures in force.
Further, Qatar’s banking sector remains competitive, and growth in financial services has also contributed to the economic diversification.
Since 1970, the government of Qatar has always talked about diversification. With this, they mean the development of alternative industries and services so that the nation’s dependence on hydrocarbon commodities can be reduced.
In terms of Agriculture, one of the practical steps that are taken includes is the agreement with the University of Qatar to introduce a program through which national cadres can be instructed in agricultural sciences.
As per Qatar National Vision 2030, one of the goals for a better socio-economic future of the country includes having a world-class infrastructure backbone.
The estimate that is set for Qatar’s major infrastructure projects is 21.6 billion USD. However, the developments include:
- A 2.7 billion USD Qatar-Bahrain causeway, which will link Qatar with the island state of Bahrain.
- Construction of New Doha International Airport is already done.
- A German firm, Deutsche Bahn also plans to design Doha Metro. Currently, it is under construction and is scheduled to become operational by mid-2019.
- A freight link to Saudi Arabia will also be constructed that will connect the urban centers of education city, west bay, and lusail.
All these projects are made so that the country can move away from dependence on energy and head towards a broad-based economy.
But as of now, Qatar has a road network of 7,790 kilometers; out of which, 1,107 kilometers are paved. The entire network is linked to Hofuf in Saudi Arabia and Abu Dhabi in the United Arab Emirates.
The unemployment rate of the country is low as 3.2 percent. There are some economically inactive people, but most of them are students.
Non-Hydrocarbon Foreign Trade
As of 2016, Qatar used to export nearly US $495 million of steel and iron and the US $1.14 billion of aluminum. The imports also included the transfer of foods (9% of total imports), and in that year, it was $2.9 billion.
Qatar Coping with its Economic and Eiplomatic Embargo
June 2017, an embargo was introduced by four neighbouring countries - Saudi Arabia, Bahrain, Egypt and the United Arab Emirates accused Qatar of supporting terrorism, a charge Qatar strongly denies. Prior to the blockade, as much as 60% of Qatar's imports are estimated to have come through the countries now boycotting it, particularly its food supplies, so the government had to act fast to secure alternative supply routes through Turkey and Iran. Almost two years of blockade, it seems like Qatar has managed to cope quite well and becoming self-sufficient.
To boost overseas investment in Qatar, in recent years the government has announced economic reforms related to labour laws, special economic zones, privatisation and higher foreign ownership limits that it says will make it easier to invest and operate in the country.
The Qatar government is already using oil and gas to get the overall economy to the next level. Along with this, the modernization of the country’s infrastructure is also paving a way on which the economy can develop. Moreover, according to the 'Qatar National Vision 2030', the addition of education, fossil fuels, and environment friendliness will also help Qatar's economy.
Over the next years, it is expected that the Qatari economy will be transformed into something that is focused on high-end technology and industries. But not to forget, the main influence on this country will always be from prices and production of natural energy.
Now, all we can do is look forward to how the economy of this country rises.