Qatar: Back To Business

Thanks to a successful vaccination campaign and higher energy prices, the country’s future looks bright.

Qatar is back in the spotlight. With the end of the Gulf Cooperation Council (GCC) embargo, a successful vaccination campaign and the upcoming FIFA World Cup Qatar 2022, the fourth-richest country in the world shows strong signs of economic recovery.

“The economic outlook for Qatar is very positive,” says Joseph Abraham, group CEO at Commercial Bank of Qatar (CBQ), the country’s third-largest bank. “The regional blockade has ended and the government’s strategy on Covid-19 vaccinations has ensured a very high coverage in the population and allowed the economy to open both domestically and to international visitors.”

Economy watchers expect growth to reach 2% by year end, compared to 2020’s 3.7% contraction. Although the pandemic hit hard, the Qatari economy better resisted the shocks of 2020 than its GCC neighbors.

“Qatar is moving in the right direction as a result of extensive efforts taken by the government, and more is being done to redefine economic growth models and ensure the country is increasingly competitive in a post-pandemic world,” says Bassam Hajhamad, country senior partner and consulting leader for PwC Qatar.

Over the past few years, the tiny Arab state started a series of governance and socioeconomic reforms, including legislative elections. Following the October 2020 ballot, Emir Tamim bin Hamad Al Thani reshuffled his cabinet and appointed Ali Bin Ahmed Al-Kuwari to head the Ministry of Finance. Before joining the government in 2018, he was CEO of Qatar National Bank, the MENA region’s largest bank, with more than $255 billion in assets. Al-Kuwari had been acting minister of finance since May, after his predecessor was arrested on alleged embezzlement charges.

“This new reform comes at a perfect time, and we anticipate more push toward centralized governance across sectors to ensure harmonized execution and measured economic impact,” says Hajhamad.

Football and Foreign Investment

Higher oil prices and hosting major international events next year will likely improve economic activity further. Qatar expects the FIFA World Cup to draw 1.5 million visitors and attract up to $20 billion, which would boost GDP growth to 3.6% in 2022. 

But the alluring prospect comes at a heavy price. Controversy over the fairness of FIFA’s World Cup bidding process and human-rights abuses—along with concerns over the country’s conservative culture that prohibits certain clothing, alcohol in public and homosexuality—has brought the country a lot of bad press.

The 12 years of preparation for the event also cost Doha more than $200 billion, mainly for building stadiums, the new smart city of Lusail and transportation and hospitality infrastructure, according to experts.

Although some stadiums can be dismantled to be reused in other countries, most of the World Cup infrastructure will stay where it is, and hopefully contribute to Qatar’s development strategy.

“With the FIFA World Cup around the corner, the market is looking up,” says Khalid Al-Subeai, CEO of Dukhan Bank. “There is increased investment in the country, a boom in the SME [small and midsize enterprise] sectors and a national focus on economic diversification—all of which promise a positive outlook for banking institutions to help finance, support and build local capabilities.”

With the World Cup and other international events, Qatar wants to show the world it is a business partner of choice. In 2020, the Qatar Financial Centre (QFC), a government body that supports business, issued more than 330 licenses for new entities to operate in Qatar. Over the coming two years, the country plans to attract $25 billion in foreign direct investment (FDI) and create 10,000 jobs.

Like most oil-producing countries that look to diversify their sources of income, Qatar looks to develop nonhydrocarbon-based economic activity. Some national champions—such as Qatar Airways, telecom operator Ooredoo and Qatar National Bank—are now big enough to compete internationally, but interestingly, smaller companies are also securing market share. SMEs such as farms and factories leveraged the embargo and the pandemic to grow their sales as more customers shopped locally.

“The emergence of new industries, factories and enterprises demonstrate the vast potential that underpins Qatar’s comprehensive economic development, earmarking the beginning of exciting new opportunities,” says Dukhan Bank’s Al-Subeai.

“Creating effective local ecosystems and supply chains has become a key factor in driving economic growth and diversification across the region,” agrees PwC’s Hajhamad. “Localization and in-country value will continue to impact both public and private entities in Qatar and will have a key role in maximizing local content in the provision of goods and services, building new homegrown industries and attracting foreign investments.”

For now, however, Qatar’s nonenergy activity remains marginal; 85% of the country’s revenue still comes from hydrocarbons, and future growth relies more than ever on liquefied natural gas (LNG).

LNG and Asian Markets

Qatar’s incredible wealth comes from its immense natural gas reserves, which are the second-largest in the world. The country is already the biggest global exporter of LNG. Still, authorities have announced that they would more than double annual production from 77 million tonnes to 126 million tonnes by 2027 with the North Field project.

Qatar should have no problem selling its expanded production. Not only is LNG one of the cheapest fuels to produce, but it has a growing market as customers in Asia look to transition from coal to cleaner energies. In September, Qatar signed a 15-year supply deal with China National Offshore Oil, China’s top oil and gas producer. The country has similar deals in the pipeline with Chinese, Korean and Indian producers.

“Investment in the North Field Expansion Project to increase Qatar’s LNG production capacity will help secure Qatar’s economic future and position as the world’s leading LNG exporter,” say CBQ’s Abraham. “However, this must be viewed alongside economic diversification efforts, and Qatar has achieved great success in developing a more sustainable and diversified economy in line with the Qatar National Vision 2030.”

For several years now, Qatar has used the wealth generated by LNG sales to fuel adjacent sectors, such as the petrochemical industry. Qatar is already the world’s second-largest helium supplier, after the US. A new petrochemical complex that will produce ethylene, polyethylene and methane will open in Ras Laffan in 2025.

In the years leading up to the pandemic, the country also invested heavily in trade logistics with the ambition of becoming a global hub connecting Western countries with the Middle East and Asia. In 2017, the emir inaugurated the $7.4 billion Hamad Port, one of the largest container ports in the region. Qatar also increased its fleet of cargo vessels, significantly growing its maritime trade capacity.


The financial system is another historic pillar of the Qatari economy, and a sector the authorities want to promote internationally. Doha is home to 18 banks, including ten local lenders, seven foreign institutions and the Qatar Development Bank.

These banks came out of the pandemic relatively unhurt thanks to high capital cushions and a low level of loan delinquency. According to the authors of a June PwC report, the total assets of Qatari banks grew 7.3%, while customer deposits were up 6.3% in 2020 over the previous year.

The banks’ external indebtedness, however, is a rising concern for many observers. In Qatar, the demand for loans chronically exceeds deposit growth. To cover domestic lending, banks borrow from their foreign counterparts—a lot. In 2020, the country’s total external debt stood at approximately 139% of GDP, of which banks support 85%.

“The pace of external debt buildup means that Qatari banks are now vulnerable to a shift in investor sentiment or a scaling back of Western central banks’ liquidity support,” according to international rating agency S&P in its latest assessment of the Qatari banking sector.

In October, Fitch Ratings placed seven Qatari banks—Doha Bank, Al Khaliji, Qatar Islamic Bank, Qatar National Bank, Dukhan Bank, Commercial Bank, Ahli Bank and Qatar International Islamic Bank—on negative watch, signaling an unfavorable outlook and a potential downgrade in its subsequent credit ratings. According to S&P, nonresident funding reached 48% of the Qatari banking sector’s liabilities compared with 38% in 2018.

Nonetheless, the banks remain confident. They know that the government, which is highly involved with local lenders as a major depositor and a shareholder in many cases, has always come to their rescue when problems arise. Recent examples include the 2017 GCC embargo, when the Qatari government used state money to cushion sudden deposit withdrawals.

“We don’t see this as an issue, as the Qatari banking system is highly regulated and given the continued prudent economic management by the state of Qatar and the Qatar Central Bank,” says CBQ’s Abraham. “Qatar has double-A sovereign ratings, strong fiscal buffers and external investments which are a multiple of its outstanding debt.”

Technology and Concentration

Government support doesn’t solve everything. To remain re-levant, Qatari banks must keep pace with the competition. Looking forward, one of the lessons learned from the pandemic has been that banks can conduct many activities more cost effectively, notably thanks to digitization. 

“The banking industry in Qatar faces a new frontier. Technological advancement in the Qatari banking sector has been accelerated due to the Covid-19 threat. There remains room for growth in fintech, artificial intelligence, blockchain and cloud computing technologies, as well as areas of Islamic banking such as Islamic regtech,” says Dukhan’s Al-Subeai, whose bank introduced contactless cards, cashless POS and e-payment gateway offerings this year. “In light of this, we are continuing to invest in R&D, specifically in data analytics and fintech, particularly in payment solutions as well as enterprise financial software and partnerships, focally outside of the banking sector.”

Although Qatar is strongly committed to digital transformation, the central bank retains a conservative approach to some of the latest technologies and keeps a close eye on cybersecurity and compliance.

“The transition to digital banking has meant there are new channels and methods that can be used for money laundering, and at the same time increased cybersecurity risks,” says CBQ’s Abraham. “Banks are having to increase their efforts toward protecting themselves against direct cyberattacks and protect their customers from fraud through social engineering, fake websites and fake social media.”

Following a broader trend, which started in the GCC a few years ago, Qatari banks look to consolidate assets by forming bigger and more efficient entities. The ongoing merger between Masraf Al-Rayan and Al Khaliji Commercial Bank, which they announced in January, is expected to create one of the largest Islamic banks in the region, with $45 billion in assets. Other banks are currently looking at mergers and acquisitions as a means to grow locally and internationally as well.