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IMF Commends Qatar's Fiscal Policy

Monday, February 22, 2010

Fiscal policy introduced by the government over the year maintained the Middle Eastern’s growth rate at an impressive 9%, from 16% in 2008, underpinned by expansions in the production of liquefied natural gas (LNG) and condensates, and a strong performance in the non-hydrocarbon sector.

The International Monetary Fund, in its Article IV Consultation with the country, commended the Qatari authorities for its fiscal policy, which it noted continued to support growth. During 2009, the Qatari authorities introduced a 10% corporate income tax rate for foreign enterprises, down from 35%, in an effort to diversify an economy highly dependent on oil and gas revenues. With the resurgence in the prices of oil and gas, the external current account is estimated to have recorded a large surplus (about 15.7% of gross domestic product), with the fiscal and external current accounts surplus expected in 2010.

The Fund has observed that Qatar’s medium-term outlook remains positive, with continuing strong growth, moderate inflation, and fiscal and external current account surpluses. The IMF identified that the main risks to the outlook for Qatar include the possibility of a slow global recovery, a large further decline in real estate prices, reduced availability of financing for projects, and additional unexpected adverse financial developments in the region.

In its recommendations, the IMF’s Executive Board welcomed the authorities’ intention to use the available fiscal space prudently. Directors concurred that the fiscal stance is appropriate and urged the authorities to maintain their capital spending, particularly since there are no fiscal sustainability concerns, until private sector activity becomes firmly entrenched.

The Board agreed that Qatar’s growth strategy, which depends on investments financed through debt, could benefit from the establishment of a formal institutional structure to develop a medium-term debt management strategy.