The Qatari economy has been able in recent years to gain several advantages that made it highly capable of facing challenges and potential risks. Thanks to its flexibility and diversity, the Qatari economy is now one of the strongest economies regionally and among the most promising economies at the global level.
The diversity and flexibility of the economy was the result of several steps taken by the State, foremost of which is providing a promising investment environment in the priority sectors of the national economy and strengthening it with an administrative and legislative system that stimulates the practice of business. In this framework, a law has been issued to organize the partnership between the public and private sectors to implement and finance businesses or to provide services, in accordance with a number of mechanisms established by the law.
The law aims to develop the capabilities of the Qatari private sector companies, encourage competition and innovation, enhance the role of these companies and their contribution to the economic development, and involve them in the management of national projects in a manner that supports the efficiency and effectiveness of implementing these projects and enhancing their sustainability with minimal costs and work, in addition to providing protection for the consumer from monopolistic practices.
The administrative and legislative system stimulating the practice of business in Qatar was distinguished by many advantages and opportunities, foremost of which is providing an appropriate legislative framework for business development and attracting investments to a developed business environment, in addition to creating promising investment opportunities in various sectors, and providing an advanced infrastructure for business.
Qatar has taken several measures to attract foreign direct investment. Companies that operate in the State of Qatar through Qatar Financial Center enjoy competitive advantages, including a legal environment based on English common law, the right to trade in any foreign currency, the 100% ownership, the 100% return on profits and 10% corporate tax on local profits.
Perhaps what confirms the evolving business environment in the State of Qatar is stated in the Global Competitiveness Report 2018 issued by the World Economic Forum, in which the State of Qatar ranked second at the regional level and third at the global level in terms of overall competitiveness, and the first at the regional level in the report’s Global Entrepreneurship Index. The achievement was largely due to its policies that have created an advanced business environment.
The States trend towards adopting open economic policies and establishing a diversified economy also contributed to enhancing the attractiveness of the investment environment, by launching important projects that embody the values of a partnership between the public and private sectors and provide promising investment opportunities in the logistics sector, food security, education, health, tourism, and sports.
Affirming the strength of the Qatari economy and its ability to continue its performance despite the challenges facing the global economy, including the spread of the novel coronavirus (COVID-19) pandemic, the State managed to maintain its high credit ratings with a stable outlook. Moody’s rating agency fixed the credit rating of the State of Qatar in April at (Aa3) with a stable outlook, and classified the economic strength (a1), which is higher than the initial degree (a3), indicating the exceptional rise in per capita income in the country and the great reserves of hydrocarbons.
In its report, Moody’s said that Qatar’s credit profile reflects the government’s strong balance sheet, vast hydrocarbon reserves, and exceptionally high per capita income. These factors provide significant shock-absorption capacity and mitigate the vulnerability of government revenue to temporary declines in oil prices, such as the one caused by the coronavirus pandemic, as well as the economic and financial risks arising from Qatar’s exposure to regional geopolitical tensions.
Moody’s noted that the stable outlook balances fiscal and economic risks stemming from the decline in oil prices with Qatar’s very large fiscal and foreign currency reserve buffers in the form of sovereign wealth fund assets, adding that the stable outlook also takes into account risks associated with the ongoing regional geopolitical tensions, including the diplomatic, economic and financial blockade imposed on the State.
The flexibility and strength of the Qatari economy were also confirmed by the Standard & Poor’s rating agency (S&P Global Ratings), which affirmed its long-term outlook for the State of Qatar at stable, and its long- and short-term foreign and local currency sovereign credit ratings on Qatar at (AA-/A-1+).
In its report issued in March, the rating agency said that in view of the sharp fall in international oil prices, it has significantly lowered its oil price assumptions for 2020 and 2021. Nevertheless, Qatars government and external balance sheets currently remain strong and provide a buffer to withstand external shocks.
It added that while the prices of hydrocarbons may remain low, the government’s fiscal and external positions will remain stable.
S&P Global Ratings expected that Qatars credit profile to be stable, supported by the very strong external and fiscal positions, which are underpinned by relatively low central-government debt and the large external assets Qatar has built up over several years. In view of oil price assumptions, the agency forecasts that the general government balance will record a deficit of 2% of GDP in 2020 compared with a 6.6% surplus in the previous year and revert to about 4.5% surplus by 2023.
The diversity that the Qatari economy which has become an essential component of its strength was confirmed by the report issued by Qatar Chamber in June marking three years of the blockade imposed on the State of Qatar. The report revealed that more than 47,000 new companies have been established in Qatar during the years of blockade, in addition to attracting more foreign investments in light of the availability of legislation, facilities, and incentives provided by the State to attract foreign investments.