Qatar’s economy has remained robust at a challenging time, and looks set for greater heights
Qatar has defied the odds since the diplomatic crisis with a number of its GCC and regional neighbors started in June 2017. Despite the severing of diplomatic relations and trade with countries including Saudi Arabia, UAE, Bahrain and Egypt, Qatar has managed to steer its economy along a growth path. While this growth is no doubt less than would have been achieved if the diplomatic dispute had not arisen, it was enough to maintain confidence while also surprising many analysts.
Qatar’s outlook was revised up to stable from negative by ratings agency S&P Global Ratings, which also affirmed the sovereign credit ratings at ‘AA-/A-1+’. “We believe Qatar has effectively managed the ongoing boycott’s impact on diplomatic ties and trade and transport links,” the organization said in a statement. “We expect economic growth to accelerate and external accounts to remain in surplus from 2018-2021, except in the event of larger declines in oil prices.”
By way of explanation of its rating upgrade, S&P Global Ratings stated: “The stable outlook primarily reflects our view that Qatar will continue to effectively mitigate the economic and financial fallout of the boycott imposed on the country in June 2017 by Saudi Arabia, United Arab Emirates (UAE), Bahrain, Egypt, Libya, and Yemen, and that Qatar will continue to pursue prudent macroeconomic policies that support large recurrent fiscal and external surpluses over 2018-2021.”
S&P said that it believes the Qatari authorities have sufficient resources to continue to manage the boycott fallout, with the government already having taken measures to ease economic and financial impacts, and it expects to see larger budgetary and external surpluses at the end of 2018 than in its last review. “We project Qatar will continue to operate surpluses in external accounts over our 2018-2021 rating horizon, on the back of oil prices above $51 per barrel,” S&P stated.
However, S&P added that the outlook could deteriorate forcing it to make a negative rating action if the boycott turns out to have a more severe impact than currently anticipated, potentially leading to a situation such as a significant capital outflow, or an unexpected deterioration in fiscal outcomes.
Earlier in the year, the World Bank also struck an optimistic tone, stating that it expected growth in Qatar to recover to 2.8% in 2018 and to rise further to an average of 3% in 2019-20. The World Bank’s rationale for this increase in growth was primarily based on Qatar’s position as the world’s biggest exporter of liquefied natural gas and host nation of the 2022 FIFA World Cup. “As rising energy receipts help ease fiscal constraints, spending on the multi-year infrastructure upgrade ahead of the FIFA World Cup continues, and as the US$10 billion Barzan natural gas facility comes onstream in 2020,” the organization said.
One potential headwind that Qatar, along with a number of other GCC nations, faces is rising U.S. interest rates. Indeed, Qatar’s peg to the U.S. dollar means that monetary policy will gradually tighten in tandem with the US monetary policy. However, government spending will be maintained at current levels, which could help off-set any negative impact from rate hikes given the economy’s current rising growth. A further plus for Qatar’s economy is key tax policy and administration measures, including the introduction of a VAT and excises during 2018, which are expected to further contain the fiscal deficit over the medium term, although inflation should also rise to close to 2.4% in 2018, the World Bank added.
One of the pillars of Qatar’s economy that has helped maintain stability is the strength of the country’s banks, which are also showing improving operating conditions, with solid loan performance and strong capital, according to Moody’s ‘GCC Banks for 2019’ report. In fact, Qatar’s banking system displayed stability across all seven drivers, which consist of operating environment, asset risks, capital, profitability & efficiency, funding & liquidity and government support.
Tourism: Tarek M. El Sayed, Managing director, Al Rayyan Tourism Investment Co
How has business been in Qatar during the past year for your company?
ARTIC’s resilient business model with its focus on diversity in terms of geographic presence, business type and business operating partners means we are well-placed to meet
different challenges. ARTIC’s business operations in Qatar have continued to perform well. Our operating businesses enjoy leading market positions and partner with renowned international operators of the highest quality. Ideally located in the center of Doha with direct connectivity to one of Doha’s leading shopping centers, City Center Doha, and within walking distance of the Doha Exhibition and Convention Center, our properties are ideal for business or leisure. Regarding projects under development, we have made good progress in the past year and are confident that 2019 will see the opening of more properties as planned.
You’re involved in the hospitality sector – how are you finding the industry overall in Qatar?
Along with the strong Qatari economy, government initiatives such as easing entry visa restrictions and the ongoing efforts of the Qatar Tourist Authority to promote the country’s tourism credentials including business and conference tourism, have all increased in-bound tourism and played a vital role in supporting Qatar’s hospitality industry.
What are the main challenges that you face? How has the blockade affected business, and how have you tried to mitigate this challenge?
While challenges are always present, it’s ARTIC’s entrepreneurial spirit and strategic thinking which enable us to turn these challenges into new opportunities. ARTIC’s unique business model and diversified geographic footprint allows us to mitigate the risks faced in specific markets. Although the blockade reduced the number of visitors from two neighboring countries, the swift initiatives implemented by the government and Qatar’s strong economy have led to growth of around 2% and have opened up new and bigger markets.
What are your expectations for 2019?
We look forward to strengthening our global position within the hospitality investment sector and to progressing our medium-term objective of becoming a listed company on one of the world’s leading stock exchanges.
We will continue to seek new investment opportunities and to further develop our investment portfolio.
Telecoms: Diego Camberos, COO, Vodafone Qatar
How has business been during the past year for Vodafone Qatar’s consumer and business services?
This past year, the improvements that we have made in our operations and focus on our customers has led to a growth in monthly subscribers. The same is also true of our fixed line services. Taken together, this has increased our revenues. At the same time, we have carefully managed the costs in our business meaning that our overall profitability also improved. Our total revenue for the period from January to 30 September 2018 grew by 5% year-on-year to reach QR 1.5 billion ($421.7 million). This is due to growth in monthly postpaid subscribers, corporate internet connections and handset sales. Our operating performance, as measured by EBITDA, increased by 16% year-on-year for the nine months to QR 425 million as a result of our higher revenues and lower costs. Our EBITDA margin has also improved and stands at 28%. The result is that we reported a net profit of QR 75 million for the nine months. This amounts to an increase of QR 303 million compared to the same period last year. We’re also seeing growth in our monthly, postpaid subscriber customers. As of 30 September 2018, these have grown by 24% year-on-year. This, together with higher service revenue, resulted in Average Revenue Per User (ARPU) – an important measure of the performance of telecommunications and digital businesses – increasing by QR 12 year-on-year. Our ARPU now stands at QR 103. Our positive financial performance is driven by a clear strategy and an effective and focused programme for controlling costs right the way across our business. We continued our growth plans by delivering innovative products, providing unmatched customer experiences across our core mobile offering and expanding our rapidly growing fixed-line proposition.
What is your current focus?
We’re focused on working closely with our regulator to ensure the competitive dynamics of the industry best support the evolving needs and requirements of the county and its population, in line with the Qatar National Vision 2030. The intervention that we have seen earlier this year on duct access agreements is a positive step forward in meeting the best interests of customers. Increased infrastructure sharing enables both operators in the country to focus on greater innovation.
Healthcare: Sidra Medicine
One critical sector that had to think on its feet in the wake of the blockade was healthcare, with certain medicines potentially being at risk of depletion. Peter Morris, CEO of Sidra Medicine, said that as a whole, the industry has fared well and as with other sectors of the economy there has been a big push on self-sufficiency. “For us as a hospital, one of the most immediate effects of the blockade was the need to find alternative sources for medicines and medical supplies, replacing those we had been using from Saudi Arabi and the Emirates. The government quickly established new trade routes and we began to import what we needed from countries including Turkey, Jordan, France and the U.K. amongst and others,” he said. “As a result, there was no great impact on patient or hospital needs.”
Demand has also remained robust. “It is important to note also that we remain open to all patients who need our specialist expertise (Sidra Medicine is a specialty women’s and children’s hospital) and we now average at least two international patients a week primarily from the Gulf Cooperation Council (GCC) countries and beyond. We are experiencing significant demand in pediatric specialties including heart surgeries, urology, plastics and craniofacial, neurosurgery,” he said.
Copyright: UMS International Fz LLCTheme