Regardless of the Qatari media’s promotion of Doha’s ability to confront the Gulf and Arab boycott, now in its second year, economic indicators by international organisations, and even some Qatari entities such as Qatar Airways, show it is the other way round.
The economy is practically depleted and key financial and banking indicators are falling to worrisome levels. To begin with, Standard & Poor’s, the influential credit rating agency, has maintained a negative outlook on Qatar’s economic future due to the continued use of its huge external financial assets to ease the impact of the boycott. This is in addition to the downgrades of the Commercial Bank of Qatar and Doha Bank by Moody’s Investors Service.
Moreover, deposits held by non-resident customers declined significantly by 24 per cent since the beginning of the boycott, which have deprived Qatari banks of nearly 40 per cent of foreign-owned funds, according to the International Monetary Fund, (IMF). The level of foreign exchange reserves held by the central bank also declined, by 17 per cent in the same period.
Talking about private and shareholding companies, which constitute an integral part of the economy, we find that, for example, the net profit of Ooredoo, the telecom company headquartered in Doha, fell 60 per cent in the second quarter of this year. Meanwhile, losses at Qatar First Bank have soared to 354 million Qatari riyals (Dh354.52 million), up 361 per cent, and the net loss at Salam International Investment shot up 73 per cent in the second quarter of 2018 compared to the same period last year.
These are just examples of how Qatar’s economy and its public and private shareholding companies are suffering from the depletion and deterioration of their performance since the start of the boycott in June 2017. There are other threats as well, including the high cost of imports, the spike in inflation, flight of capital, and huge military spending which does not meet any necessary security and military needs but is just to satisfy those countries taking sides with Qatar in its dispute with the neighbours.
Since the beginning of the crisis, Qatar has purchased weapons and military equipment worth more than $55 billion (Dh202 billion), not to mention bearing the huge cost of the presence of foreign forces brought to Qatar after the boycott. A soldier deployed in Qatar is costing Doha more than $9,000 per month in addition to the services and other facilities entailed by the huge presence of foreign forces.
There are other channels through which Qatar is wasting its money. It is financing media campaigns, trying to get support from overseas for its positions, and is also financing campaigns against the boycotting countries. It has created fake accounts and which became so obvious after the number of Twitter followers of the Qatari Emir declined by more than two million after Twitter suspended such accounts. The scandal revealed the truth of these accounts and those behind them.
Recently, Qatar attempted to rescue some of its allies from their economic crisis, including Iran and Turkey, by injecting billions of dollars into their economies. Last week, it announced $15 billion to help stop the deterioration of the Turkish lira, placing itself in an opposing position with its major ally, the US, and its president Donald Trump, who is pursuing an arm-twisting policy with Turkey.
Qatar still has sizeable cash balances abroad but these are being wasted and would be exhausted if the Gulf crisis lasts another three years and even before that. The Qatari economy is quite small compared to the economies it is trying to help.
This is in addition to the continued military spending and the presence of military bases for other countries. Taken together with the cost of funding media attacks and that spent on imports, the deterioration of its financial and monetary institutions and foreign assets pose a challenge that would fuel the decline of the Qatari economy.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.