The non-hydrocarbon sector will expand 4.6 percent, the Washington-based lender said in an emailed statement on Wednesday, compared with 5.6 percent in 2016 and a 4 percent prediction in a Bloomberg survey of economists.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut ties with Qatar on June 5, accusing the nation of 2.7 million people of destabilizing the region through its ties to Islamist extremists -- a charge Qatar has repeatedly denied. The bloc’s measures have exacerbated a broader slowdown in Qatar triggered by lower energy prices, with economists expecting gross domestic product to expand at the slowest pace since 1995 this year.
Authorities reacted quickly to the spat with Qatar’s neighbors, limiting the fallout by finding alternative sources for imports and ensuring key infrastructure projects aren’t disrupted, the fund said. Even so, imports fell 40 percent on an annual basis in June and 35 percent in July, official data show.
Non-oil economic growth is expected to reach 4.8 percent over the medium term as Qatar, which is spending $200 billion to upgrade infrastructure ahead of the 2022 soccer World Cup, implements fiscal reforms, the IMF said. Over the longer term, though, the diplomatic fallout could “weaken confidence and reduce investment and growth” in Qatar and other Gulf Cooperation Council nations, it said.
Lender Pressure
Local banks had come under pressure during the dispute, with some lenders in Saudi Arabia, the United Arab Emirates and Bahrain cutting their exposure to Qatar. Foreign deposits dropped the most in two years in June, and Moody’s Investors Service cut its outlook on Qatar’s banking system to negative on weakening operating conditions.
Policy makers mitigated the impact on local lenders’ balance sheets by injecting liquidity and boosting public sector deposits, and Qatari banks remain “sound, with high asset quality and strong capitalization,” the IMF said.
The fund also said:
- Qatar’s current account will return a surplus of about 3.9 percent of GDP in 2017, compared with a deficit of 7.7 percent last year due to the import contraction and the recovery in oil prices
- Central government deficit to shrink to 5.9 percent from 8.8 percent
- Government to introduce value-added tax in the first half of 2018