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30/08/2017 - 16:47hs
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Qatar pushes forward economic adjustments

The IMF highlighted the efforts by the Arab country to strengthen the economy after the embargo by neighboring countries. Government is pushing forward the fiscal adjustment and diversifying import sources.



São Paulo – Qatar’s economy is adjusting to the impacts caused by the embargo imposed by neighboring countries in June, according to a report released this Wednesday (30) by the International Monetary Fund (IMF). An IMF team, headed by Mohammed El Qorchi, visited Doha from August 13 to 20.

According to Qorchi’s statement, the country registered a sharp contraction in imports in June, 40% year-over-year, but saw a slight recovery in July. Qatar has been working to diversify its imports and external financing sources, in addition to enhancing local food processing.

The countries that imposed the embargo to Doha are important trade partners. Besides cutting diplomatic cites, Saudi Arabia, Bahrain, United Arab Emirates and Egypt suspended the transit of people, good and vehicles to and from Qatar. The group accuses the country of supporting terrorist groups, which the Qatari government vehemently denies.

The IMF representative said that there was a quick answer to the situation by the authorities. The country is proceeding with an important fiscal adjustment, cutting current expenditures and increase non-oil revenues. This year, Qatar’s non-oil Gross Domestic Product (GDP) should grow 4.6%. Despite the increase, it stands below the 5.6% seen last year.

The central government’s deficit should drop to 5.9% this year, below the 8.8% seen in 2016. Next year, the country will continue to push forward fiscal consolidation, introducing new management measures, such as further rationalization of expenditure and the introduction of the Value-Added Tax (VAT). The improvement in oil prices should help strengthen the economy.

To lessen the impact of the embargo among financial institutions, the Qatar Central Bank did liquidity injections in the system and increased the deposits by the public sector. “Qatar’s banking sector remains sound, with high asset quality and strong capitalization,” said Qorchi. According to him, monetary authorities are ready to meet future withdrawals by non-residents. At the time of the embargo, non-residents withdrawals increased sharply.

According to the IMF, the diplomatic rift could weaken confidence and reduce investments and the growth of Qatar and possibly of other countries from the Gulf Cooperation Council (GCC). Qatar’s government approved a second national development strategy, focusing on the economic diversification. The country also doesn’t require entry visas anymore for 80 nationalities, including Brazilians, to stimulate tourism, and created a new permanent-resident status for foreigners.

*Translated by Sérgio Kakitani

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