How has diversification supported Qatar’s economic recovery?

As with other countries around the world, Qatar’s economy was affected by the Covid-19 pandemic. The health crisis has had wide-ranging effects in global markets, including disruptions to supply chains, a downturn in foreign and domestic travel, and a drop in international oil prices – trends that were especially apparent in the early stages of the pandemic. Due to these factors, in 2020 Qatar recorded its first fiscal deficit since 2017 and its GDP contracted by 3.7%, according to the World Bank.

Despite these pressures, the country was able to navigate the pandemic and emerged from the crisis in a position to leverage the global recovery to support its diversification drive. The economy began to recover in late 2020, and in 2021 the prices of oil, natural gas and liquefied natural gas (LNG) rose, bolstering the country’s revenue streams. At the same time, in January 2021 the economic blockade imposed by some of the country’s regional neighbours in 2017 was lifted. The year 2022 is expected to bring further growth, especially as Qatar prepares to host the 2022 FIFA World Cup. The tournament will not only bring visitors and revenue to the country, but it will serve as an international platform to attract future tourists, investors and development partners.

Swift Response

Indeed, Qatar’s economic performance during the pandemic underscored the strength of its response to the economic blockade. After trade and transit ties were disrupted in the second half of 2017, the government worked to diversify its trading partners and international travel connections, as well as develop local supply of certain products to boost economic diversification and self-sufficiency. The economy has been supported by the North Field expansion project, which will increase LNG production from 77m tonnes per year in 2018 to 110m tonnes per year in 2027, when the project is forecast to be completed. The development will further cement the country as a leader in the global energy market.

Qatar also continued to roll out important reforms in the labour market (see analysis), while looking to implement environmental, social and governance (ESG) criteria across sectors. A new public-private partnership (PPP) law was also introduced, encouraging further foreign participation in the economy. The framework seeks to build on previous regulations that opened more businesses to international ownership and eased residency requirements for investors.

Structure & Oversight

Executive power in Qatar rests with the Amir, Sheikh Tamim bin Hamad Al Thani. The Amir chairs the Supreme Council for Economic Affairs and Investment, which develops and oversees policy related to investment, energy, financial reserves and the economy at large. The Amir appoints a prime minister – currently held by Sheikh Khalid bin Khalifa bin Abdulaziz Al Thani, who took office in January 2020 – who is tasked with leading the Council of Ministers. The body serves as the cabinet, which advises the Amir. The council includes the heads of all ministries, including the Ministry of Finance (MoF), the Ministry of Labour, and the Ministry of Commerce and Industry (MoCI). The MoF supervises and regulates public finances, while the MoCI manages the manufacturing, trade and investment portfolio.

In October 2021 a cabinet reshuffle saw the Ministry of Transport and Communications divided into the Ministry of Transport, and the Ministry of Communications and IT. The Ministry of Municipality and Environment was also divided into two ministries, the Ministry of Municipality, and the Ministry of Environment and Climate Change. The Ministry of Culture and Sports was similarly split into the Ministry of Culture, and the Ministry of Sports and Youth. These changes reflected the government’s aim to better coordinate efforts on priorities across sectors.

The minister of state for energy affairs also sits on the Council of Ministers, as well as on the board of Qatar Energy, the national energy company (previously Qatar Petroleum). Other members of the cabinet include the deputy Amir, Sheikh Abdullah bin Hamad bin Khalifa Al Thani, and the minister of finance.

The Shura Council, also called the Advisory Council, is the legislative branch. The body held its first elections in October 2021, with 30 of the 45 seats decided by popular vote and the remaining 15 appointed by the Amir. The Shura Council has the authority to approve state policies and the budget.

The Qatar Central Bank (QCB) is the financial regulator, and responsible for preserving monetary stability and sector development. It is headed by the board of directors and its governor, Sheikh Bandar bin Mohamed bin Saoud Al Thani, who was appointed in November 2021. The QCB governor is also a member of the board of the Qatar Investment Authority. The authority is the country’s sovereign wealth fund, and was created in 2005 to help diversify the economy and protect financial assets for future generations.


The General Secretariat for Development Planning is charged with monitoring the implementation of Qatar National Vision 2030 (QNV), the country’s long-term economic roadmap. As a medium-term plan, the Second National Development Strategy 2018-22 (NDS-2) is aligned with QNV and the UN’s 2030 Agenda for Sustainable Development, which Qatar adopted in 2015. “Qatar is on track to meet many of the goals of NDS-2,” Saleh bin Mohamed Al Nabit, president of the Planning and Statistics Authority (PSA), told OBG. “We have seen progress in many areas, particularly in the development of the private sector and economic diversification in priority sectors, supported by substantial investment in physical infrastructure.”

The PSA has begun to prepare the Third National Development Strategy (NDS-3) for 2023-27 in cooperation with government ministries and agencies, the private sector and civil society organisations. While the new strategy will put forth clear development objectives, the Covid-19 pandemic has underscored the need for flexibility, so the NDS-3 is expected include a greater degree of adaptability to help the country navigate shifting local and global circumstances.

The government has introduced several policies in recent years to improve the business climate and bolster private participation in line with development goals (see Trade & Investment chapter). In 2020 a new PPP law was introduced to streamline and accelerate the implementation of this project model throughout the economy. It established a specific framework for PPPs, which were previously covered under the Tenders and Auctions Law.

More recently, in late 2021 a law creating a dedicated Investment and Commerce Court was passed to handle issues including dispute resolution – particularly regarding foreign investment – commercial contracts, PPPs and intellectual property rights. The court is set to begin operating in May 2022.


Qatar has two tax regimes. The first is operated by the General Tax Authority and covers the majority of businesses in the country, while the second is operated by the Qatar Financial Centre (QFC) Tax Authority. The latter covers businesses in the QFC, an onshore financial services zone with its own regulatory authority and legal framework based on UK common law. A range of financial and non-financial incentives is available for firms operating in the QFC.

Qatar does not have personal income tax and corporate tax is set at 10% for most businesses. As a member of the GCC, Qatar is committed to enacting value-added tax of at least 5%. This was scheduled to be implemented in 2019, but was postponed to 2022.


As the world’s second-largest exporter of natural gas and one of the largest exporters of LNG – as well as producing significant quantities of crude oil – hydrocarbons form a major part of Qatar’s GDP. The resources’ share of GDP has declined in the last 20 years – from around 57% in 2000 to 47% in 2018 and 37.3% in the third quarter of 2021 – as diversification efforts have advanced. Even so, hydrocarbons account for three times the share of GDP as the next-largest sector, construction, which accounted for 11.9% at constant prices in the third quarter of 2021. Other key sectors include financial and insurance activities, which accounted for 9.4% of GDP that period; followed by manufacturing (8%); wholesale and retail trade (7.6%) and real estate (6.9%).

Due to the economy’s concentration in hydrocarbons, Qatar remains vulnerable to fluctuations in energy prices. In 2020 measures designed to contain the health effects of the pandemic impacted demand for oil, gas and LNG worldwide, as industries, commerce and social life scaled down. Demand for many of Qatar’s manufactured goods also fell, as industry is dominated by petrochemicals, fertilisers, and other refined petroleum and natural gas products. Sectors such as transport, tourism, hospitality and retail were impacted by travel restrictions, social-distancing requirements and lockdown measures. In 2019, for example, Qatar saw 1.9m foreign visitors and 200,000 GCC visitors, but in 2020 these numbers fell to 500,000 and 100,000, respectively.

The pandemic had a significant impact on the size of Qatar’s expatriate population as well, which accounted for 85% of the total in recent years. Some source countries, such as India, organised the repatriation of workers, while new labour was unable to travel to take up contracts. By the start of the pandemic most of the labour-intensive projects connected with the 2022 FIFA World Cup had been completed, which alleviated the impact of the decline in temporary workers. According to the PSA, the population dropped from 2.8m in March 2020 to 2.7m in December 2021, but recovered to 2.8m by February 2022.


PSA data shows that Qatar’s real GDP shrank by 0.9% year-on-year in constant prices in the first quarter of 2020, a trend that continued throughout the year. In the second quarter the economy contracted by 6.1%, followed by a contraction of 4.5% and 3.9% in the third and fourth quarters, respectively. However, the tide began to turn the following year, with the economy contracting by 2.5% in the first quarter before growing by 4% in the second. In the third quarter – the most recent period for which data was available as of early 2022 – the economy grew by 2.6%. A survey of leading forecasters published in January 2022 by the PSA shows consensus for GDP growth in 2021, at around 2.8% for the year, with this figure set to rise to 3.7% for 2022.

Behind this return to growth has been an increase in energy prices, with June 2021 seeing oil prices rise above $75 a barrel, a level not experienced since 2018. That month also saw LNG spot prices surpass $12 per million British thermal units (Btu) in Asia, the highest level since 2014. Prices continued to surge during the Northern Hemisphere winter, with LNG prices hitting $45 per million Btu in December 2021. Russia’s invasion of Ukraine in February 2022 pushed energy prices up further, to more than $100 a barrel and $59 per million Btu by March of that year.

The Al Ula agreement that ended the economic blockade further facilitated a return to business in 2021, as land and air barriers to commercial traffic and trade were removed. Qatar’s Covid-19 vaccination rollout helped as well. By April 2022, 89% of the population had received two doses of approved vaccines.


Even with the recovery, global inflationary pressures have affected Qatar, which imports around 90% of its daily needs. Qatar had been experiencing deflation before the pandemic, with the change in the consumer price index (CPI) dropping below zero in the first quarter of 2020, a development that was closely tied to low energy prices.

CPI growth returned to positive territory at the beginning of 2021, reflective of higher energy prices, global supply chain bottlenecks, quantitative easing in developed markets and commodity price hikes. The CPI was at 101.75 points in November 2021, an annual increase of 6.1%, while the producer price index reflected an annual rise of 100% to 93.9 points. The riyal’s peg to the US dollar, at QR3.64:$1, helped to cushion the inflationary effects.


In 2021 China overtook the US as the top source of Qatar’s imports, accounting for 17.4% of the total, while the US dropped to 11% from 16% the previous year. The country’s other main import partners were the UK (8.1%), India (6.2%) and Italy (5.7%). Machinery and equipment (40%), manufactured goods (15%), chemical and hydrocarbons products (14%), and food (12%) were the top import categories.

Much of Qatar’s exports, meanwhile, are sent to Asia, with India (13.6%), South Korea (13.2%), Japan (12%), China (11.4%) and the UK (8.3%) representing the top destinations in 2021. That year exports were dominated by hydrocarbons, at 82% of the total, while manufactured goods accounted for 10% and chemicals much of the remaining 8%, according to the PSA.

Given its hydrocarbons exports, Qatar traditionally enjoys a balance of payments (BoP) surplus, which reached a recent high of 5.3% of GDP in 2018. However, due to the pandemic’s impact on prices and trade, in 2020 the country registered a BoP surplus of 0.4%, or QR1.9bn ($521.5m). With energy prices ticking upwards by the end of the third quarter of 2021, the BoP surplus rose to 2.3%. At the same time, Qatar’s current account reflected a deficit of 2.5% in 2020, but by the third quarter of 2021 it recorded a surplus of 16%. The capital and financial account, for its part, recorded a surplus in the second and third quarters of 2020 of 2.7%. However, this declined to a deficit of 12.6% in the third quarter of 2021. Foreign direct investment showed net outflows during 2020 and 2021, as investors in many emerging markets sought more traditionally secure investments.

Fiscal Policy

Qatar entered the pandemic after two years of fiscal surplus – 2.3% in 2018 and 1% in 2019 – as recovering oil and gas prices and non-oil GDP growth moved the country back into the black after years of hydrocarbons-related declines. In March 2020, however, the government implemented lockdown measures and travel and social-distancing restrictions to contain the spread of Covid-19. It also boosted health resources, scaled up testing and treatment capacity, and launched a range of fiscal and monetary easing measures to aid households and businesses through the crisis. These factors helped shift the fiscal balance to a deficit of 3.6% of GDP.

A significant part of these measures targeted liquidity maintenance and support for private companies. Programme items included a QR50bn ($13.7bn) repurchase (repo) package for commercial banks with an interest rate of 1%, enabling them to grant new loans to businesses and postpone interest payments from enterprises that are unable to pay; a QR10bn ($2.7bn) injection into the Qatar Stock Exchange to underpin confidence in the stock market; and a QR5bn ($1.4bn) National Response Guarantee Programme implemented via Qatar Development Bank to provide payroll support to small and medium-sized enterprises. The programme also included exemptions from rent, Customs fees and utility payments for firms in industrial zones, logistical areas and Al Furjan markets (government shopping centres).

Monetary Measures

With government revenue declining sharply due to pandemic-mitigation measures, the drop in oil and gas prices, and a downturn in exports, policymakers redirected some funds. Spending on projects deemed non-essential to the pandemic response or the 2022 FIFA World Cup were delayed, while some allocations for secondary items within the government budget were cut. The result was a 13.4% reduction in budgeted government expenditure in 2021. These efforts reduced the size of the fiscal deficit to 2.3% of GDP that year, according to estimates from the World Bank.

The 2021 budget accounted for an oil price of $40 per barrel, down from the $55 per barrel price outlined for 2020. Salaries and wages in the public sector were to be cut an additional 1.9%, and major projects by 19.9% as large-scale infrastructure works for the 2022 FIFA World Cup wound down. Overall, the QR194.7bn ($53.4bn) budget was forecast to record a deficit of QR34.6bn ($9.5bn), with public debt covered by available balances from previous bond issues.

The $40 per barrel assumption proved to be significantly understated. As global energy prices recovered, public revenue moved from a year-on-year (y-o-y) contraction of 25% in the third quarter of 2020 to y-o-y growth of 20% in the third quarter of 2021. According to a 2021 report from the PSA, nine entities including the World Bank and Moody’s forecast Qatar’s fiscal balance for the year at between -2.3% and 5.4% of GDP, for an average of 2.2%.

The 2022 budget assumed an average oil price of $55 per barrel, with revenue of QR196bn ($53.8bn) – 22.4% higher than in 2021 – and expenditure of QR204.3bn ($56.1bn), indicating a deficit of QR8.3bn ($2.3bn). The increase in expenditure is largely for preparations related to the 2022 FIFA World Cup, while education and health continue to be priorities. With oil prices at over $100 per barrel for Brent crude in March 2022, the budget may see a large surplus by year’s end. However, the historical volatility in energy prices necessitates caution in financial planning.

Public debt rose at the start of the pandemic but then remained stable in the second year of the crisis, with government debt at 73% and 72% of GDP in 2020 and 2021, respectively. Both figures were higher than those seen in previous years, with 2017 and 2018 recording 52% and 62% of GDP, respectively. Government debt totalled QR298.5bn ($81.9bn) in 2019 and QR381.7bn ($104.8bn) in 2020. Domestic debt fell from QR173.3bn ($47.6bn) to QR152.8bn ($41.9bn) over the same period due to the non-issuance of domestic debt instruments, as well as the repayment of domestic debt instalments. Meanwhile, foreign debt rose from QR225bn ($61.8bn) to QR229bn ($62.9bn), owing to a 2020 sovereign bond issuance and borrowing from international financial institutions. In early 2022 the PSA estimated that government debt remained relatively stable in 2021, at QR382bn ($104.8bn), comprising QR219.8bn ($60.3bn) in foreign and QR162.2bn ($44.5bn) in domestic debt.

The QCB has helped ensure financial stability by keeping its interest rates constant since early 2020, when it moved to enhance liquidity in the market by lowering rates. The bank operates two main rates, a QCB rate on deposits and a QCB rate on loans, with the first lowered from 1.5% to 1% and the second from 3.5% to 2.5% in March 2020. The central bank also lowered the repo rate from 1.5% to 1%.

As the international community continues to recover and move beyond the pandemic in 2022, one of the main challenges going forwards will be to manage fiscal and monetary policy appropriately, as well as repay loans issued to the private sector during the crisis. “When monetary authorities start to reverse the unprecedented liquidity operations, it will be important to continue with vigilance by all players to address concerns related to the credit market,” Sheikha Alanoud bint Hamad Al Thani, deputy CEO and chief business officer of the QFC, told OBG.


Elsewhere, recent years have seen significant reforms in the Qatari labour market, conducted by the government in consultation with the International Labour Organisation. The kafala, or sponsorship, labour system has been largely dismantled, giving workers the ability to change employers while remaining in Qatar. The benefits of this became immediately apparent during the pandemic, with companies able to recruitment locally more easily. New standard employment contracts for domestic workers have also been implemented, alongside strengthened complaints procedures and workplace inspections. The Workers’ Support and Insurance Fund was introduced as well, and as of August 2020 it had disbursed approximately QR14m ($3.8m) to 5500 workers.

In March 2021 a non-discriminatory minimum wage law came into force, stating pay of at least QR1000 ($274) per month for all workers, regardless of nationality and sector. Additional payments of QR300 ($82.34) and QR500 ($137) for food and housing are also now obligatory, if not already provided.

At the same time, awareness of ESG and diversity is growing in many sectors, fostering a new approach to expansion planning. “Qatar’s financial sector is witnessing stronger ESG adherence,” Sheikha Alanoud told OBG. “For example, companies registered with the QFC are hiring more females, with women taking the majority of recently opened positions. This reflects the growing pool of female talent that is adding value across numerous industries.”


While uncertainties remain over the trajectory of the global and domestic recovery, as well as the longer-term trend of oil and gas prices, a number of factors indicate that Qatar is on course for a strong performance in 2022 and beyond. In particular, oil and gas prices are likely to remain high in the short term, and further development of the North Field should help the country retain its position as one of the top LNG exporters. With manufacturing activity tied closely to hydrocarbons, the sector is likely to see a strong return to growth as demand increases with global economic revival. At the same time, the authorities are expecting a rebound in tourism, transport and hospitality, especially during the weeks of the 2022 FIFA World Cup. Government officials plan to leverage the event as an opportunity to showcase Qatar as an alternative to traditional travel destinations.

The lifting of the economic blockade should also help to boost investment and business activity from GCC neighbours going forwards, and the expatriate population may well rise in the years ahead as employment opportunities return, which would support real estate and retail activity.

Overall, the country has implemented many policies and regulations in recent years to bolster resilience to external challenges – efforts that paid off during the blockade and the pandemic – and future growth is expected to build on these moves going forwards.

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The Report: Qatar 2022

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