Source: The EIU


Political and Economic Brief:

Qatar is a peninsula situated halfway along the West Coast of the Arabian Gulf.  It has a number of islands; the most important ones are Halool, Shira’aw, Al-Ashart and others.  Its topography consists of a rocky flat surface with some limestone outcrops in Dukhan area in the west and Fuwairit area in the north. The surface is full with characteristic depressions called Rawdat, particularly in the north and central plains. The total land area of Qatar including the islands is approximately 11,521 square kilometers. The population of Qatar amount to 743,000 inhabitants (according to the initial results of the second stage of the 2004 population census) compared to 522,000 inhabitants in the last census conducted in 1997 and 83% of the inhabitants reside in Doha and its main suburb Al-Rayyan.


Qatar became independent from the UK in 1971 and since then has been ruled by the monarchy (Emir) of Al Thani family. The country is ruled by Sheikh Hamad bin Khalifa al-Thani since 1995 who has pursued a programme of gradual political and economic reform, with a particular focus on developing the country's massive natural gas reserves.  Sheikh Hamad has appointed a cabinet of ministers and rules the country with their assistance. However, under the new constitution—passed overwhelmingly in a nationwide referendum in 2003—a new national assembly will be created, two-thirds of the members of which will be elected.


Since 1995, the Emir of Qatar has emphasized heavily on the development of its oil and gas resources and developing its economy. Qatar’s proven oil reserves of 15 billion barrels (588,000,000 m³) and oil has given Qatar a per capita GDP that ranks among the highest in the world. Qatar's proven reserves of natural gas exceed 7000 km³; more than 5% of the world total and is the third largest in the world. However, with work on a range of gas-based export projects under way, the government has decided to impose a moratorium on new gas export deals in order to ease capacity constraints and re-evaluate the country's energy reserves. As a result, it is seeking to draw greater foreign investment into other areas, with ambitious plans in place to expand Qatar's petrochemicals industry, manufacturing base and tourism sector, among others.



Qatar’s economy predominantly remained dependent on the oil and gas sector, though in the recent past, the contributions of the Finance, Insurance, Real Estate & Business Services Sector, Transport and Communications Sector and the Manufacturing Sector in the GDP have witnessed marked improvement.  During 2005 to 2007, the Finance, Insurance, Real Estate & Business Services Sector witnessed a growth of 49%, 45% and 49%, respectively. Qatar is poised to be a leading international financial services sector among the Gulf countries. Similarly, the Transport and Communications Sector witnessed a growth of 27%, 40% and 37% during 2005 to 2007, respectively. The Manufacturing Sector which is the second largest economic sector other than the oil and gas and Government services sectors witnessed a growth of 22% and 21% during 2006 and 2007, respectively.  Along with rapid economic and infrastructure development, particularly since 2005, Electricity and Water Supply Sector, Building & Construction Sector and the Trade and Restaurant Sector also recorded significant growth.


Merchandise exports have surged in recent years, as oil prices have increased and energy export volumes have grown. As a result, the current-account surplus increased from US$3.8bn (19.4% of GDP) in 2002 to US$9.5bn (16.7% of GDP) in 2006. However, it narrowed slightly in 2007, to an estimated US$5.5bn, reflecting both rapid import spending growth and a small fall in oil production.


Rising oil prices combined with fast pace economic development had its impact on money supply and inflation also. Money Supply (M2) sharply increased from US$ 12.3 billion in 2004 to US$ 17.7 billion, US$ 24.4 billion and US$ 32.3 billion during 2005, 2006 and 2007, respectively. Inflation also increased sharply from 2.3% in 2003 to 6.8%, 8.8%, 11.85% and 13.76% in 2004, 2005, 2006 and 2007, respectively. Average inflation is expected to peak in 2008, at 15%, as high oil prices, rising import costs and increased fiscal expenditure cause liquidity to surge.



Future Outlook

Politically, Qatar is expected to remain stable as its external security will continue to be guaranteed by the US, which has substantial military facilities in the Emirate. The Emir, Sheikh Hamad bin Khalifa al-Thani, will retain a strong grip on policy-making but pursue a policy of involving the general public into politics through the Majlis al-Shura (Consultative Council). 

Qatar is one of the smallest Gulf Countries in terms of population and geographical area but the second largest gas reserves in the world representing more than 5% of the world total.  The prosperity of natural resources coupled with the growing and diversifying economy means enormous access to investment opportunities and incentives.  The Qatari government adopts a policy aiming at diversifying income resources and developing economic infrastructure.  Specifically, the government expanded the exploration projects in oil and gas sectors and offered numerous incentives to attract foreign investors to carry out similar projects.  The Qatari economy is one of the most rapidly growing economies in the world offering the international community a variety of world-class and cutting-edge products and services.

Qatar’s nominal GDP growth continues to reach record levels, averaging 25% over the past five years. Oil prices are expected to remain high over the forecast period, supported by continued strong global demand, especially from Asia. Oil prices are expected to increase by the middle of 2009 reaching an average of US$120/barrel by end-2012.

The government is likely to end its moratorium on entering into new gas export projects towards the end of the forecast period, allowing new liquefied natural gas (LNG) and, potentially, gas-to-liquids projects to be given the go-ahead. Real GDP growth will peak in 2009, at 13.4%, as the LNG programme reaches its high-point, but will slow to a still strong 5.2% in 2012.

The current-account surplus will widen sharply until 2010, as LNG export volumes triple, although the pace of expansion will be curbed by surging income debits (owing to rising profit repatriation by foreign firms). However, the surplus will stabilise in 2011-12, as gas export sales growth slows. Qatar has the highest GDP per capita income in the world estimated at US $68,467 in 2008.

However, inflation is expected to moderate from 2009, as new property comes on stream and global non-oil commodity prices fall back, causing average inflation to decline to around 5% by the end of the forecast period.

Qatar provides a no-tax regime for its people and expatriate workforce. Companies from the GCC countries are required to pay a tax of 12%, while their non-Gulf Cooperation Council counterparts are required to pay a corporation tax up to a maximum of 35%. However, Qatar is expected to lower this rate to 12% in the near future.  The country has set up tax-free zones in which a tax holiday of 20 years is provided. It welcomes foreign participation in joint ventures to invest in all the various sectors of its economy with 51% Qatari participation. Profits in the hydrocarbons sector are taxed differently, according to the share of the company in the project and the level of capital investment.