Qatar

Gas and diversification behind the recovery

After reporting slow growth since the 2022 FIFA World Cup, Qatar's GDP is expected to gradually recover in 2025. Growth will be driven by a modest increase in hydrocarbon (accounting for approximately 40% of GDP in 2023) and non-hydrocarbon activities. Sectors such as construction (around 12% of GDP), tourism (10%), retail and finance are expected to support growth. The expansion of the North Field, the world's largest natural gas field, which Qatar shares with Iran, is expected to drive growth in the hydrocarbon sector. After stagnating in 2024, total hydrocarbon production is expected to increase by 1% in 2025. The Qatar North Field East natural gas expansion is expected to add 45 bcm per year to Qatar's current production of around 170 bcm per year in the coming years. Low inflation and falling interest rates will support private consumption (around 20% of GDP) in 2025. In addition, public spending on large infrastructure projects and encouragement for the private sector as part of the diversification of the economy will help maintain investment (around 40% of GDP). However, investment growth is expected to remain subdued after averaging almost 7% between 2010 and 2020. Aside from hydrocarbons, the authorities will give priority to transportation, tourism, ICT, financial services, and food. This is in line with the Third National Development Strategy (2024–2030), a plan to help Qatar achieve the objectives under its National Vision 2030 programme. In 2025, as inflationary pressures are expected to remain low, the central bank will be able to gradually ease monetary policy in step with the US Fed, given the current peg regime.

Budget and current account surpluses, solid reserves

Hydrocarbon revenues, which account for 50% of total fiscal revenues, are expected to be negatively impacted by several factors, but will be offset by an increase in non-hydrocarbon revenues. These factors are likely to include lower global energy prices, muted demand for LNG from Europe, and slower growth in the Chinese economy, Qatar’s largest LNG client. Although Qatar is set to maintain its position as a major global LNG exporter, it is anticipated to encounter heightened competition from the US, Oman, and the UAE, particularly in Japan and South Korea. Total spending is expected to increase by around 4.5% in 2025 compared to 2024, with salaries and wages rising by 5.5%, current expenses by 6.3%, and “secondary” capital expenditure (i.e., supporting large projects) by 8%. The government is expected to finance the development of major infrastructure projects as well as strive to attract highly qualified expatriate workers to help with the diversification of the economy.

The current account surplus is predicted to erode slightly as reduced energy prices (90% of total merchandise exports) will have a wider impact than a smaller services deficit. An annual 5% increase in tourism revenues in 2025 is expected to prevent the current account surplus from shrinking further. In addition, demand for imported capital goods will remain strong due to the ongoing large infrastructure projects. Irrespective of the above, Qatar's external reserves remain robust, with the central bank holding USD 70 billion in international reserves (in November 2024), the equivalent of approximately 12 months of imports. The Qatar Investment Authority (QIA) separately holds assets estimated at around 180% of GDP, with investments spanning various sectors including sports, entertainment, media, ports, real estate, retail, and airports. This strategy enables the emirate to manage external surpluses while enhancing its international reputation and generating additional investment income.

Political stability to continue despite geopolitical risks

Political stability should prevail as the local population is largely satisfied with their quality of life and standard of living, partly due to social spending. There are no major political factions as the government is united behind the Emir, who appoints it. In November 2024, a constitutional referendum was held regarding the selection process for the members of the Shura council. The results indicated a shift from the election system that was introduced in 2021, with 90.6% of votes in favour of the appointment of its members. This is expected to reinforce the policy-making process in Qatar as the election system caused problems within tribes.

Qatar has been able to maintain balanced diplomatic relations with various countries including the US, Israel, Iran, Türkiye, Egypt, and Saudi Arabia. However, given the ongoing instability in the Middle East, there is a risk that Qatar could experience spillover effects in terms of refugees, political unrest, etc., particularly from Iran, Syria and Iraq. Overall, however, Qatar's position as a global diplomatic mediator is expected to continue. Economic cooperation with China could increase in the near future, especially after the latter acquired a 5% stake in the liquefied natural gas expansion project at the North Field gas field. This cooperation could encompass new areas such as ICT, construction, tourism, etc., thereby facilitating Qatar’s diversification. On the other hand, however, it could put the country in a delicate position vis-à-vis the US whose largest regional military base is in Qatar, especially in light of growing tensions between the US and China.

Last updated:January 2025