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Qatar

Expanding gas output to maintain growth

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LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

Updated in January 2025.

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Form of state Emirate
Head of state Tamim bin Hamad Al Thani (Emir)
Next elections To be determined

Strengths & Weaknesses

Strenghts
  • Qatar’s vital role in the LNG market and commitment to diverse sectors, including sports and tourism, fosters economic stability and growth.
  • Robust diplomatic ties with several countries as mediator on diplomatic disputes and host of global events increase the likelihood of international support in case of another deterioration of relationship with the Saudi-led bloc.
  • The North Field East LNG expansion project, combined with low inflation and enhanced fiscal policy, supports significant economic development.
     

 

Weaknesses
  • Qatar’s heavy reliance on hydrocarbon exports exposes its economy to fluctuations in global energy prices, necessitating tax reforms.
  • Geopolitical instability and trade bottlenecks, especially through the Hormuz Strait, pose risks to Qatar’s export-dependent economy.
  • The North Field East LNG expansion project, combined with low inflation and enhanced fiscal policy, supports significant economic development.

Economic Overview

Hydrocarbons continue to drive growth, awaiting the expansion of the largest gas field

Qatar has one of the highest levels of GDP per capita in the world, yet the economy relies significantly on hydrocarbon exports. GDP growth is expected to accelerate to +4.3% in 2025 after an estimated +2.7% in 2024, signaling a rebound from the post-World-Cup moderation. Inflation is expected to remain low at 2% y/y in 2025, from 1.6% in 2024, alongside progressive monetary relaxation following the US Federal Reserve’s move.

The energy sector will continue to drive the economy in the mid-term. In 2026, the expansion of the North Field East gas field – the largest in the world – should double the field’s output by 2030. Meanwhile, the expansion is already a major economic driver through significant investment spending. In addition, infrastructure investment and fast-growing tourist arrivals are contributing to drive momentum. We expect the tourism industry to sustain its recent vibrancy – visitor arrivals increased by almost +30% in the first nine months of 2024, compared to the previous year. Geopolitical instability in the region and trade bottlenecks are downside risks since most exports are shipped through the Hormuz Strait.
 
The Qatari riyal is pegged at QAR3.64 per USD. The peg is likely to stay in place, given the economic stability it provides and Qatar’s significant international reserves to defend it.

Sound fiscal space allows for growing spending

External liquidity will remain unproblematic in the mid-term. Qatar has recorded large current account surpluses for more than two decades, with the exception of 2016 and 2020, when global oil and gas prices were particularly low. These surpluses have helped build up the Qatar Investment Authority (QIA), a sovereign wealth fund currently estimated above USD500bn. The combined international reserves of the central bank and the QIA represent over two times the annual GDP and cover more than 80 months of imports. Furthermore, Qatar successfully accessed international markets by issuing a USD.5bn green bon in April 2024. This bond achieved the lowest spread ever recorded for a Middle Eastern, African or Eastern European country. This milestone coincided with the launch of the first renewable energy strategy.

With oil and gas revenues accounting for around 85% of fiscal inflows, lower global energy prices might jeopardize tax collection. Yet, as gas prices are projected to remain higher in the mid-term, compared to crude prices, Qatar won’t have the pressure to implement alternatives sources of tax revenue, such as the long-awaited value-added tax (VAT). With a strong fiscal outlook, public debt is expected to decrease from 45% of GDP at the end of 2023 to 33% by the end of 2028.

The economic acceleration and the soundness of Qatar public buffers is reflected in the increase of public expenditure, including military spending, health, and education budgets, as well as infrastructure investment. The 2025 budget has increased infrastructure spending by 5% to around USD58bn with a variety of new infrastructure projects. The Public Works Authority (Ashghal) will play a key role as the projects cover many sectors and provide potential for private sector engagement.

Dollars and balanced diplomacy to drive its global presence

In line with the other Gulf economies, in late 2024, the Qatari authorities approved a new Qatarisation law, which will be enforced in the spring of 2025, requiring firms to prioritize the employment of Qatari nationals, except for companies in the energy sector. In parallel, the Qatari government also approved reforms to bring more flexibility to the existing labor market, allowing workers to freely change employment, increasing the minimum wage and abolishing exit permits, among other reforms. Both reforms should bring mixed results to the labor market.

Qatar’s ample liquidity buffer is allowing the country to play a greater role in the Gulf and the broader Middle East region. Amid the risks of exporting all its gas via the Strait of Hormuz, Qatar, together with the UAE and Turkey signed an agreement to invest in the Iraq development road, an infrastructure project that should link the Gulf with the Anatolian peninsula via road, rail and potentially pipelines.  In addition, like other GCC members, Qatar is investing in enhancing rail and road connections with Saudi Arabia to link the country to the GCC Railway.

Qatar’s foreign policy is based on counterbalancing partnerships that strengthen its regional strategic position and serve as a backup for regime security. Relations between Qatar and its Arab neighbors, Saudi Arabia, the UAE, Bahrain and Egypt, have improved in a pragmatic manner since 2017. Qatar has also continued to position itself as a strong partner of the US, with a recent strengthening of ties with the Biden Administration, as it also enjoys strong links with East Asian partners as it is the main provider of LNG to the region.

Trade Structure by destination/origin 

(% of total, 2023)

Trade Structure by product  

(% of total, annual 2023)

Contacts

Lluis Dalmau
Economist for Africa and Middle East
lluis.dalmau@allianz-trade.com

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