Qatari economy has fully come out of the initial adverse impacts from the unjust economic blockade. This is reflected in the normalisation of capital flows, comfortable liquidity position of the banking system, official foreign exchange reserves returning close to the pre-blockade level and a healthy growth in bank credit to private sector and a reasonable growth in the non-hydrocarbon sector, Qatar Central Bank (QCB) revealed yesterday.
“The trade and current account surpluses and fiscal balance improved continuously. Capital flows normalised despite the ongoing economic blockade, getting more diversified and from relatively stable sources. There has been a significant rebuilding of foreign exchanges reserves and improvement in liquidity positions in the banking system.
These improvements, combined with economic diversification policies implemented in the recent years, have reduced domestic vulnerabilities”, QCB said in its 10th Financial Stability Report (FSR) released yesterday.
The document, an annual assessment of financial sector’s risks and vulnerabilities, underscored Qatar’s ability to withstand any unforeseen disturbances and maintain financial stability going forward.
QCB Governor H E Sheikh Abdulla bin Saoud Al Thani commented: “In the middle of weakening global economy, Qatari economy showed a resilient performance during the review year. Although real GDP growth was somewhat slower than the preceding year, other macroeconomic indicators including fiscal position, current account balance and stock market improved in 2018.
“With normalisation of capital flows and strengthening of macroeconomic conditions, Qatar economy has fully come out of the initial adverse impacts from the economic blockade.”
In 2018, Qatar continued to remain competitive in terms global competitiveness index (GCI) of World Economic Forum. According to revised GCI, Qatar ranked 30 out of 140 Advanced Economies (AEs) and emerging market and developing economies (EMDEs), rising by 2 positions from 2017. Among the emerging economics, Qatar’s position was one of the highest.
Banking sector in Qatar showed a resilient performance in 2018. Though banking sector assets grew lower than the previous year, 2018 witnessed a rebound of private sector credit demand. Liquidity improved supported by benign fiscal position and current account balance. Improvements in stock market also boosted the operating environment of the banking sector. Rebound in non-resident deposits as well as fund flow from foreign financial institutions indicated confidence of investors in Qatari economy. Improvements in domestic liquidity eased primary liquidity, which remained in surplus mode, with lower requirement of REPO by banks for short-term liquidity management.
The FSR noted Qatar’s banking sector re-established the funding structure with healthier maturity structure and from diversified source. Almost all the deposit from the blockading countries have gone out of the system thereby reducing the volatility risk. Capitalisation levels strengthened significantly, while NPL ratios are quite low and are adequately provisioned. Moreover, banking sector profitability indicators also remained stable. Stress tests conducted by Qatar Central Bank also showed improved resiliency of the sector towards plausible vulnerabilities. Overall, the banking sector remained sound and in good stead during 2018.
Taking advantage of government push for the SME sector development, banks are also focusing on credit to SME sector, especially for agriculture, livestock and fisheries.