First Published: 2017-10-16

Qatar starts to feel pinch from sanctions
Gulf investors have withdrawn deposits from Qatari banks and the Doha stock market.
Middle East Online

By Mohammed Alkhereiji - LONDON

Qatari trader follows the stock market

Sanctions imposed on Doha by other countries in the region are taking a toll on Qatar’s economy, par­ticularly its private sector, with the government scrambling to cushion the fallout from the cri­sis.

Despite denials that it is fi­nancially strained, Doha has an­nounced measures designed to shore up its economy, including incentives to help foreign busi­nesses and the expatriate commu­nity, which is a cornerstone of its economy.

Qatari Prime Minister Sheikh Abdullah bin Nasser bin Khalifa al-Thani ordered rent rates for companies in logistics zones cut 50% starting in 2018 and going into 2019, Qatar’s official news agency reported. The statement said new investors in those zones would be allowed to operate businesses rent-free for up to a year, provided they obtain building permits by specific deadlines.

Sheikh Abdullah also said the Qatar Development Bank, which provides start-up firms with fi­nancing options, would permit the delay of loan repayments for up to six months to ease matters for in­novators.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt sev­ered ties with Qatar on June 5 over what they described as Doha’s in­terference in their countries’ in­ternal affairs and its support for radical groups, such as Hamas, the Taliban and the Muslim Brother­hood. The Qatari government de­nied the allegations.

In addition to cutting diplomat­ic ties, the Arab quartet imposed trade restrictions and ordered their citizens to leave Qatar, result­ing in a slowdown in the tourism, trade and banking sectors.

The sanctions have affected the Qatari economy to such a degree that the government is rushing to raise funds through a bond sale. Government officials are in talks with banks and financial institu­tions to decide on the timing for the sale, with the bond likely to be valued approximately $9 billion, Bloomberg News reported.

The effect on Qatar’s finances has been severe. The Doha gov­ernment injected approximately $40 billion — equivalent to 23% of its GDP — into its economy in the first two months of the crisis. The breakdown in relations has result­ed in the outflow of approximately $7.5 billion in foreign customer deposits and a further $15 billion in foreign interbank deposits and borrowings, the Qatar Central Bank said.

Gulf investors have withdrawn deposits from Qatari banks and the Doha stock market. In the quartet of countries, Qatari-owned busi­nesses have begun to close shop and sell assets.

Qatar’s economy was sluggish before the dispute erupted due to lower oil prices. Bloomberg News said the country’s GDP grew only 0.6% in the quarter ending June 30 from a year earlier.

This, coupled with Doha’s fi­nancially draining World Cup en­deavour, which Qatari officials said is costing the country about $500 million a week, indicates things are not going to improve soon. Experts predicted the Qa­tari economy will expand 2.5% this year, its slowest growth since the mid-1990s.

Mohammed Alkhereiji is the Arab Weekly’s Gulf section editor.

This article was originally published in The Arab Weekly.

 

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