Propelled by a major infrastructure development drive in preparation for the 2022 FIFA World Cup, and a broad-based loosening of investment and business regulations, Qatar’s economy has undergone significant expansion in recent years. The country’s immense natural gas reserves are being further tapped and production capacity expanded, while related revenue is being pumped into the diversification of the economy, with the long-term goal of reducing the country’s reliance on its hydrocarbons sector, and stimulating multi-sector growth and job creation. Social development is another core focus, with high levels of government funding and private investment being placed in the health care and education sectors. The government is keen to improve quality of life indicators in a country whose GDP per capita ranks among the world’s highest.
Structure & Oversight
The Amir, Sheikh Tamim bin Hamad Al Thani, holds executive power in Qatar. He is chair of the Supreme Council for Economic Affairs and Investment, which oversees fiscal and economic policy formulation, and also the activities of the Qatar Investment Authority (QIA), the country’s sovereign wealth fund. Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani was appointed to the position of prime minister in March 2023, having held the position of minister of foreign affairs since January 2016. He now occupies both roles.
The prime minister heads the Council of Ministers, which serves as the primary advisory body to the Amir. Every government ministry is represented in the Council of Ministers, with the Ministry of Finance (MoF), the Ministry of Labour, and the Ministry of Commerce and Industry (MoCI) among the most significant bodies in Qatar’s economic development.
The minister of state for energy affairs, Saad bin Sherida Al Kaabi, was first appointed in November 2018 and retained his office during cabinet reshuffles in October 2021 and January 2024. He is also the deputy chairman, president and CEO of Qatar Energy (QE) – formerly Qatar Petroleum – which, given the prominence of the country’s hydrocarbons sector, is another important entity in Qatar’s economy.
The Shura Council, also known as the Advisory Council, is another body central to Qatar’s economic and fiscal policy development. The body held its first elections in October 2021, with 30 of the 45 seats decided by popular vote – a key development in light of the Qatar National Vision 2030 (QNV) goal of ensuring greater citizen participation in economic and governmental affairs – and the remaining 15 appointed by the Amir. The Shura Council is the country’s legislative authority, with the power to approve economic policy and the state budget.
Meanwhile, the Qatar Central Bank (QCB) formulates monetary policy and works to reinforce the strength of the Qatari riyal, while regulating, controlling and supervising business and financial services activities and markets. It is headed by the board of directors and its governor, Sheikh Bandar bin Mohammed bin Saoud Al Thani, who was appointed in November 2021. Since March 2023 he has also has served as the chairman of the board of directors of the QIA. The Investment Promotion Agency (Invest Qatar), meanwhile, is the central point of contact for international investors either operating or interested in entering Qatari markets. The agency’s Invest Qatar portal provides a one-stop shop for foreign direct investment (FDI) processes.
Strategy
Launched in 2008, QNV sets out the government’s socio-economic targets up to and beyond the document’s titular timeframe. Its multidimensional approach combines a focus on human, social, economic and environmental development. The government is working to enhance the country’s socio-economic landscape by modernising and upholding Qatari tradition and culture, stimulating opportunities for current and future generations, facilitating economic expansion and diversification, working towards climate goals, and addressing the size and quality of the expatriate workforce, which comprised 95% of the country’s 2m workers in 2023, according to the World Bank.
QNV sets the objective of reducing Qatar’s carbon emissions by 25% by 2030. The National Environment and Climate Strategy is spearheaded by the Ministry of Environment and Climate Change, which was established in 2021, and QE. Indeed, QE’s rebranding was designed to reflect the country’s drive to establish a more diverse energy mix. Qatar has the third-highest natural gas reserves in the world, holding 12.5% of the global total. Those reserves and related production infrastructure imbue the country’s climate-related programmes with great vigour due to the fact that gas is considered the cleanest fossil fuel and is therefore key to the transition from hydrocarbons to renewable energy.
Renewables have seen increased investment from Qatar in recent years, with the country’s first solar farm launched in October 2022. Major transport sector-related developments completed in time for Qatar’s hosting of the 2022 FIFA World Cup – such as Doha Metro, the electric Lusail Tram system and the expansion of Hamad International Airport – were developed to stringent environmental specifications.
Implementation of the country’s overarching development plan is aided by the formulation of a series of short-term roadmaps. The Second National Development Strategy for 2018-22 focused on infrastructure development, private sector development and diversification, better utilisation of natural resources, enhancing human capital and health care, and social inclusion. Notably, female workforce participation rose during the period 2009-23, from 10.9% of the total to 17.1%.
The Third National Development Strategy (NDS-3) for 2024-30 was launched in January 2024. The NDS-3 is focused on achieving long-term economic growth and financial and environmental sustainability, while fostering a versatile workforce, a cohesive society, a high standard of living, and efficient government institutions and services (see analysis).
Budget
Early indications for 2023 saw the country was performing well above budget forecasts, with revenue of QR68.6bn ($18.8bn), expenditure of QR48.9bn ($13.4bn) and a surplus of QR19.7bn ($5.4bn) for the first quarter of 2023 reported in June of that year. That surplus was equal to 68% of the estimate for the entire year, with the higher-than-anticipated revenue attributed to the average oil price of $82.20 for the first quarter of the year, outstripping the $65 forecast by the government at the time the budget was formulated. The positive performance continued later in the year, with the MoF announcing a budget surplus of QR12bn ($3.3bn) for the third quarter, with revenue of QR61.8bn ($17bn) and expenditures of QR49.8bn ($13.7bn).
Qatar’s general budget for FY 2024 amounted to QR202bn ($55.4bn), representing an 11.4% decrease from FY 2023 total budget revenue estimates. The MoF attributed this reduction to an anticipated decrease in revenue due to lower oil prices, with the average oil price per barrel projected at $60 for 2024 compared to $65 per barrel in 2023. Total oil and gas revenue for 2024 is estimated by the MoF to reach QR159bn ($43.6bn), compared to QR186bn ($51.1bn) in 2023, a 14.5% decrease.
In comparison, non-oil revenue for 2024 was estimated to hit QR43bn (11.8bn), up 2.4% compared to the budget for the previous year. Expenditures in the FY 2024 budget were projected to increase by 1% to reach QR200.9bn ($55.1bn), which is mainly attributable to a QR1.5bn ($412m) rise in allocations for salaries and wages compared to 2023. The budget allocation for major capital expenditures in 2024 was down 8.3% compared to the 2023 budget, due to the completion of many big-ticket infrastructure projects. Meanwhile, allocations for the health and education sectors constituted 20% of the total budget, reflecting the government’s prioritisation of human capital development.
GDP Performance
With the exception of a pandemic-induced 3.6% contraction in 2020, Qatar’s real GDP saw steady growth from 2019 to 2022. Indeed, 2022 saw real GDP amount to QR690bn ($189bn), up from QR659bn ($181bn) in 2021. That translates to growth of 4.7%, higher than the global average of 3.2% for 2022 and faster than all regional averages, with the exception of the Middle East and Central Asia (5%), according to the Planning and Statistics Authority. Mining and quarrying – a category comprising the “extraction of crude petroleum and natural gas”, and “other mining and quarrying”, with the former accounting for 99.8% of sector weighting – contributed 37% to total GDP in 2022, growing at a rate of 1.7% following multiple annual contractions. The sector is set to augment its standing as the top performing sector for the foreseeable future, due in large part to the ongoing expansion work on the country’s North Field, which forms part of the largest single natural gas reserve in the world – a reserve that Qatar shares with Iran.
Construction, financial and insurance services, public administration and compulsory social security, and manufacturing made up the five top-performing sectors in 2022, between them accounting for 36% of total real GDP. The sectors displaying the fastest yearon-year (y-o-y) growth for the first quarter of 2023 were accommodation and food services, at 17.2%; transport and storage, at 16.8%; manufacturing, at 10.9%; real estate, at 6.1%; and agriculture, forestry and fishing, at 6%, while real GDP expanded by 2.7%.
The IMF projected that Qatar’s real GDP rose by 2.4% in 2023, a figure forecast to fall slightly to 2.2% in 2024. The country’s account balance stood at $38bn in February 2024, which is equal to 15.4% of GDP. Meanwhile, government gross debt amounted to 38.3% of GDP in 2024, down from 41.4% in 2023.
According to the IMF GDP in 2023 was QR853bn ($236bn), representing an increase of 1.6% from 2022, which in light of Qatar’s population of around 2.9m equates to a GDP per capita of QR286,000 ($78,600), one of the highest in the world.
At $29.8bn, total FDI in Qatar for 2022 was 25 times higher than in 2021, while the 135 projects launched during 2022 were estimated to have created 13,972 new jobs – double the amount created the previous year – with notable growth in the oil and gas, IT, business services and automotive industries.
Private Sector Expansion
The Qatar Financial Centre (QFC), an onshore financial and business zone, compiles a purchasing managers’ index (PMI) based on survey responses from approximately 450 private non-energy sector companies operating in the manufacturing, construction, retail, wholesale and services spaces. The QFC PMI measures output, orders, employment, delivery times and stock levels to arrive at a single composite index figure, with 50 as the baseline. The PMI for February 2024 was 51, up from 50.4 in January 2024.
In February 2024 total business activity of companies surveyed by the QFC rose, as did new business. In addition, February 2024 marked the 12th consecutive month of expansion in employment, with the manufacturing, and wholesale and retail sectors leading the way. Lead times for inputs shortened for the 22nd consecutive month in February 2024, a further sign of supply chains being strengthened. Wages, salaries and purchase costs underwent marginal increases during the month in question, which drove an increase in average input prices, whereas output prices fell for the fourth straight month, recording the largest drop since February 2022.
Trade
As a relatively small country, Qatar is dependent on imported products, yet its substantial natural resource reserves allow it to perform well in terms of international trade. Indeed, in 2021 total international trade of goods and services amounted to QR607bn ($167bn) and a positive balance of QR161bn ($44.2bn). That balance increased throughout 2022 due to spikes in energy prices, with total trade of goods and services amounting to QR860bn ($236bn) with a positive balance of QR317bn ($87bn). The same year, total exports came to QR589bn ($162bn), with goods accounting for QR477bn ($131bn). Meanwhile, total imports for 2022 came to QR271bn ($74.4bn), with the balance composed of QR122bn ($33.5bn) for goods and QR149bn ($40.9bn) for services. The end-of-year trade surplus for 2022 was QR317bn ($87bn). While monthly variations can be observed throughout any given year, Qatar’s exports are driven by its strong hydrocarbons-related industries, with petroleum gas the country’s primary product, and crude petroleum, refined petroleum, ethylene polymers and nitrogenous fertilisers also among the country’s highest-volume exports.
Doing Business
Recent initiatives have helped improve Qatar’s reputation among international investors. Investment zones and related bodies such as the QFC, Qatar Science and Technology Park, and Qatar Free Zones Authority – all launched between 2005 and 2018 – present an array of opportunities for foreign and private investors, while the 2019 FDI Law allows for 100% business ownership for foreigners across most sectors and economic activities. Furthermore, in addition to the Invest Qatar facility, both the MoCI and the General Tax Authority (GTA) now operate centralised digital portals through which all business licensing and registration, and taxation requirements and processes can be carried out.
In addition, the enactment of the 2020 Public-Private Partnerships (PPP) Law has been effective in better harnessing the private sector to meet the country’s economic development goals. The PPP Department was launched simultaneously and operates under the umbrella of the MoCI, with various other entities involved in PPP regulation depending on the scale and type of development. Since its launch, the law has been utilised to draw investment into national infrastructure developments, such as the QR2m ($549,000) construction of eight schools in 2020, while in September 2022 the contract was signed for the Al Wakra and Al Wukair sewage treatment plant project, with private investment accounting for 50% of the total QR5.4bn ($1.5bn) development cost. Moving forwards, the government anticipates harnessing the law to bolster education, health care and tourism infrastructure.
Property
Laws surrounding property ownership for foreigners in Qatar have also been eased in recent years. The most recent updates announced in January 2023 were part of government attempts to stimulate higher activity in the country’s real estate market as part of its diversification drive. Prior to January 2023 non-Qataris were permitted to own property on a freehold basis in nine locations throughout the country. Following the updates, a further 16 locations were added in which foreigners are able to own property on 99-year lease agreements for residential or commercial purposes. Purchasing property of a certain value entitles non-Qataris to certain residency benefits, such as health insurance.
Taxes
The PwC 2020 Paying Taxes report named Qatar as having the third-least demanding taxation system in the world. An income tax law enacted in 2018 established a 10% rate of taxation on corporate entities’ Qatar-sourced earnings. However, there are exemptions that apply to qualifying bodies under specific conditions. Amendments to the income tax structure launched in May 2023 focus on the definition of a “permanent entity” in Qatar and the criteria that determine those entities’ tax rate and status. Meanwhile, GCC member states agreed to a regionwide value-added tax (VAT) framework in 2018. Saudi Arabia, the UAE, Bahrain and Oman had brought the tax into operation as of early 2024.
A draft law regarding the introduction of VAT in Qatar has been approved by the Council of Ministers, and while the law has not yet been officially published, the initial VAT rate is expected at 5% – the standard rate agreed on by GCC governments. As of February 2024 the Qatari government had not given any public indication of when it might introduce VAT. Elsewhere, luxury and excise taxes are imposed on a selection of products and items, with tobacco products, energy drinks and a range of “special purpose goods” – one of those being alcohol – subject to a 100% levy. There are no inheritance, estate, gift, personal wealth or property taxes imposed in Qatar.
Banking
Qatar’s currency is hard pegged to the US dollar at the nominal rate of one riyal to $3.64. The peg is implemented by the QCB, the country’s central financial institution. Qatar’s commercial banks trade the dollar at 0.24% above the rate for their dealings with the public and business community. The currency peg means that stabilising the riyal against the dollar is a central concern for the QCB, and in July 2023 the bank followed the US Federal Reserve in implementing a policy interest rate hike of 25 basis points to reach its highest ever lending rate of 6.25%. This rate remained in place as of April 2024. The QCB orients its overnight rates in accordance with the average overnight interbank rate, and aims to align the overnight rate with the QCB deposit rate.
As of the end of 2022 there were 16 banks operating in Qatar, consisting of nine local and seven foreign. Of the nine local banks, five are commercial operations and four are sharia-compliant institutions. The domestic banking market has undergone consolidation since 2019, with the merger between the International Bank of Qatar and Barwa Bank – the first ever merger in the Qatari banking sector – creating Dukhan Bank in October 2020. In addition Al Khaliji Commercial Bank completed its merger with Masraf Al Rayan in November 2021. QNB commands nearly 50% of the local market share.
Foreign banks must be licensed by either the QCB or, for banks operating inside the QFC, by the QFC Regulatory Authority (QFCRA). Although there are no restrictions on capital flows, during periods of tightened liquidity local organisations engaged in public development projects are prioritised for bank loans.
Inflation
In a global economic landscape characterised by high inflation, Qatar has fared well. According to the IMF, average consumer inflation in Qatar reached a 14-year high of 5% in 2022 before falling to 2.8% in 2023. The average for 2024 was forecast at 2.3%, well below the average inflation rate of 10% in the Middle East for the corresponding period.
The producer price index (PPI) was rebased in 2022 from 2013 to 2018. Industry weighting is set as follows: mining, at 82.5%; manufacturing, at 15.9%; electricity, at 1.2%; and water, at 0.5%. The PPI for the first quarter of 2023 displayed a quarter-on-quarter drop of 11.9% and a y-o-y contraction of 8.9% due to price fluctuations across key commodities and activities. The quarterly drop was caused by decreases in prices for oil and natural gas (13.4%), chemicals and chemical products (6.8%), basic metals (4.6%), and coke and refined petroleum products (2.6%).
The y-o-y drop in the PPI was composed of decreases in the price of chemicals and chemical products, of 25.6%; crude oil and natural gas, of 7.3%; coke and refined petroleum products, of 3.7%; and other mining and quarrying, of 2.2%. Increases were noted in the prices of printing and reproduction of recorded media, of 9.6%; food products, of 6%; rubber and plastic products, of 4.5%; beverages, of 1.2%; and other mining and quarrying, of 0.4%.
QFC
The QFC was established in 2005 and is located in Doha. It operates under its own legal, regulatory, tax and business frameworks and is, along with Qatar’s other free zones, a core component of the economic diversification drive, offering competitive business incentives and robust expansion potential to international companies (see Industry chapter). Incentives include 100% foreign business ownership, 100% profit repatriation allowances and a 10% corporate tax rate on profit generated in Qatar.
Part of the QFCRA’s remit sees it forging partnerships to drive economic diversification. Strategic alliances with Elegancia Healthcare – a subsidiary of Qatar-based Estithmar Holding – and US-based payments firm Mastercard were established in 2023. The former will see the partner entities working to stimulate greater collaboration between public and private entities, including academic and industrial players, to increase innovation in the Qatari health care sector, with strengthening the country’s start-up ecosystem central to the agreement. Meanwhile, through its agreement with Mastercard, the QFCRA will work to reinforce the financial services sector. Knowledge sharing will be harnessed to boost revenue generation, and education and training, while advanced technologies such as distributed ledger technologies, digital assets and regulated digital currencies, among others, have been identified and targeted for deeper integration into the country’s financial services systems.
Outlook
Qatar’s strong trade receipts in 2023 exceeded the government’s annual fiscal forecast. Nevertheless, the government appears to be acting prudently, while key financial institutions are still operating with caution in light of global inflation resulting from geopolitical volatility. At the same time, projections of lower oil prices in 2024 have resulted in a slight reduction in the general budget for the fiscal year ahead. That measured approach to economic development, coupled with sound investment and fiscal policy revision from relevant Qatari entities, should continue to ensure that the country’s global reputation as a secure investment environment is further enhanced moving forward.
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