A report issued by Capital Economics suggests that the hit to Qatar’s economy from the diplomatic crisis with Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt has started to fade.
Qatar’s oil and gas exports have continued to flow freely, as the Dolphin pipeline – which sends gas to the UAE – has remained open. The dispute, however, has hurt imports, as they fell by more than 30 percent year-on-year (YoY) in both June and July. Also, evidence suggests a delay at a number of construction projects.
Turkey has increased its exports to Qatar, with exports surging 170 percent YoY in July.
Qatar was able to reroute imports via Oman instead of Dubai’s Jebel Ali port, and earlier this month, it opened its new Hamad port, the MENA region’s second largest port, which can handle large container ships that had previously been unable to dock in the country.
Inflation pressures have started to ease. Food inflation jumped from -1.9 percent YoY in May before the blockade to 4.5 percent YoY in July, but it fell to 2.8 percent YoY in August, Capital Economics added.
Non-food inflation also dropped back and the headline inflation rate stood at -0.4 percent YoY last month, its lowest rate since mid-2010. Also, weaker housing and utilities inflation may be a sign that the downturn in the real estate sector has gathered pace, the report said.
Commercial banks’ foreign liabilities continued to fall in August, yet at a slower pace than June and July.
“The central bank has not released FX reserve figures beyond June, but we suspect that the drawdown in reserves has slowed,” CE said.
Meanwhile, a jump in public sector deposits has more than offset a fall in private sector deposits.
Interbank interest rates and CDS premia have fallen, while the Qatari riyal has returned to its peg of 3.64 to the dollar.
“All in all, the risk of an economic collapse has diminished. But the diplomatic crisis looks set to drag on, which will keep economic growth subdued,” CE added.
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