Qatar’s return to economic normality
8 January 2024
Diplomacy, not economics, was the flavour of the fourth quarter for Qatar, which has become active again in the conflict resolution arena in recent months, mediating in disputes as far apart as Gaza and Venezuela.
Qatar’s efforts in November to secure a truce in the war between Israel and Hamas secured particularly favourable headlines for Prime Minister and Foreign Affairs Minister Sheikh Mohammed bin Abdulrahman bin Jassim al-Thani and Minister of State Mohammed bin Abdulaziz al-Khulaifi.
Regretfully, the humanitarian truce proved short-lived, and further efforts by Qatar, Egypt and others to forge a broader ceasefire have yet to succeed – though Doha has had successes elsewhere with its mediation efforts in recent months.
Equally important in terms of cementing Doha’s ties with Washington was Qatar’s role in securing the release of US prisoners in Venezuela on 20 December. Qatar’s involvement led to 10 American inmates being allowed to go home, in return for one Venezuelan. Al-Khulaifi said of the Venezuelan deal that it was part of a broader mediation effort to reduce tensions between the two countries.
It was certainly appreciated by Washington, with US ambassador to Doha, Timmy Davis, saying in response: “Once again, Qatar has proven itself an indispensable ally to the United States.”
The positive US sentiment towards Qatar has also been reflected in the new year by a deal between the two countries for the renewal of the US military presence at the expansive Al-Udeid Air Base for another 10 years.
More broadly, Qatar’s recently renewed wave of diplomacy efforts harks back to previous initiatives by Qatar to promote itself as a leading global mediator. From 2008-16, it worked on reducing tensions and forging peace agreements in about 10 regional and international conflicts.
These diplomatic efforts took something of a back seat as the country built itself up for the 2022 football World Cup, but it now appears that the government’s appetite for a role as an instrument of soft power has returned.
Economic heading
At the same time, it remains a pressing concern for Doha to develop a replacement anchoring economic initiative to follow in the wake of its World Cup boom. Such direction is currently lacking, and that was palpably evident when details of the state’s budget for 2024 were issued on 21 December.
Outside of the energy sector, there are only a handful of strategic projects that are continuing, such as a national cancer hospital – and nothing on the scale of the stadium and infrastructure build-out for the football tournament, which sustained the country’s non-hydrocarbons economic growth for a decade.
There are only a handful of strategic projects that are continuing – and nothing on the scale of the stadium and infrastructure build-out for the football tournament
Several more large events are scheduled to take place in the coming years, including the 2030 Asian Games, but none are likely to rival the World Cup in terms of spending or impact.
Overall, expenditure is set to reach QR200.9bn ($55.2bn) in 2024, just 1 per cent higher than the year before. Public sector salaries and wages will account for QR64bn of that total, up 2.4 per cent year-on-year. However, major capital expenditure is down 8.3 per cent.
Based on the highly conservative estimate of an average oil price of $60 a barrel in 2024, compared to $65 a barrel in 2023, Qatar’s revenues are set to decrease by 14.5 per cent to QR159bn this year. This reduction will be partly offset by an expected 2.4 per cent rise in non-oil revenues to QR43bn.
In a press conference on 21 December, Finance Minister Ali bin Ahmed al-Kuwari said that if spending remains at the projected level, the budget will produce a surplus of QR1.1bn, compared to the 2023 budget surplus estimate of QR29bn. However, Qatar also plans to pay off QR7.3bn of debt during the year, meaning the exchequer is projected to realise a deficit of QR6.2bn.
James Swanston, Middle East and North Africa economist at London-based Capital Economics, said the spending plans could yet be expanded. “Qatar’s 2024 state budget showed a slight fiscal loosening … and, if anything, officials may raise spending even further,” he said.
There is plenty of room for manoeuvre given the country’s ample gas reserves and low debts. Qatar’s public debt shrank from 58.4 per cent of GDP in 2021 to 42.5 per cent in 2022 and is expected to continue to fall to 37.4 per cent by the end of this year.
The Washington-based IMF describes the trajectory of the post-World Cup economy as one of “normalisation”. In a statement issued on 21 November following a visit to Doha, IMF mission chief Ran Bi said: “After very strong performance in 2022, economic growth has been normalising, while the medium-term outlook remains favourable.”
The IMF expects annual output to expand by about 1.75 per cent in the period 2023-25, with the non-hydrocarbons sector growing at 2.75 per cent a year. The IMF’s forecast in October was based on a more optimistic oil price of $79.9 a barrel, however.
Energy expansion
In the absence of another national project of note, Qatar has been doubling down on its investments in the expansion and development of its upstream gas infrastructure.
In May, QatarEnergy awarded the $10bn contract for the development of two new liquefied natural gas (LNG) trains at North Field South to the joint venture of France’s Technip Energies and Greece’s Consolidated Contractors Company. This built on a similarly significant $13bn contract awarded in 2021 to Japan’s Chiyoda and Technip Energies to build four LNG trains as part of the North Field expansion project.
Doha also struck a series of long-term supply deals in 2023 for the output from the expanded North Field, including three 27-year contracts signed in October alone, covering the supply of 3.5 million tonnes a year (t/y) of LNG to both TotalEnergies and Shell, and 1 million t/y to Italian major Eni. The following month, Doha signed a deal to supply a further 3 million t/y over 27 years to China Petrochemical Corporation (Sinopec).
QatarEnergy chief executive and Minister of State for Energy Affairs, Saad al-Kaabi, said in mid-December that more deals were imminent. Meanwhile, on 28 December, QatarEnergy announced a five-year crude oil supply deal with a Singapore-based subsidiary of Shell, covering up to 18 million barrels a year from January 2024. Al-Kaabi said it was his company’s first-ever five-year crude sales agreement.
There remains a ready market for the country’s natural gas, not least as the world’s energy transition fuel of choice, as a halfway step away from more polluting oil and coal. Doha nevertheless knows that it needs to find more non-hydrocarbons revenue sources. In the IMF’s November statement, Bi said the country’s plans include “accelerating revenue diversification through further mobilisation of non-hydrocarbons tax revenues”, but exactly what this means in practice has yet to be spelt out.
MEED's February 2024 special report on Qatar includes:
> GOVERNMENT & ECONOMY: Qatar’s return to economic normality
> BANKING: Qatar’s banks adjust to new circumstances
> OIL & GAS: Qatar enters period of oil and gas consolidation
> POWER & WATER: Qatar power and water projects to take off
> CONSTRUCTION: Qatar construction enters reboot mode
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READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDFGlobal energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.
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