Qatar Economic Forecast

After expanding in the first quarter, GDP likely grew at a solid rate again in Q2. The energy sector slowed from the prior quarter, but the non-energy sector seemed to gain pace. The data available for Q3 so far suggest a similarly modest expansion. Energy production contracted year on year in August for the first time since January, before growing moderately in September. In addition, the government issued fewer construction permits in the quarter compared to the same period a year ago, likely knocked by higher interest rates and the end of the FIFA World Cup. More positively, non-oil business activity rose sharply compared to the prior quarter, according to PMI data. Moreover, visitor arrivals soared 78% yoy to rise well above pre-pandemic levels, pointing to heightened activity in the hospitality sector.

Inflation rose to 2.5% in October from 1.8% in September. In 2024, average inflation is projected to cool from this year on recent interest rate hikes and a tougher base effect. That said, the Qatar riyal’s peg to the U.S. dollar will apply upward pressure, given that the dollar is set to depreciate ahead. The possible introduction of VAT poses an upside risk.