Qatar's Economic Change and Growth: 1995–2020 Analysis

Introduction: Qatar's Economic Background

It is important to note at the outset that Qatar was one of the poorest countries in the world prior to World War II. At that time, the country derived a large portion of its revenue from fishing and pearling (Etheredge 2011:99). This began to change in the 1940s, following the discovery and development of oil reserves. Over the last four decades, Qatar's economic growth has been rapid.

Qatar has become a wealthy country, with a free, well-monetized economy that operates without deposit interest-rate ceilings, allowing market forces to determine interest rates. It does not face the population pressures, poverty traps, or structural economic problems that afflict many other developing countries. Since the mid-1990s, policymakers' ongoing attempts to diversify income, control government spending, and oversee privatization have contributed to improved efficiency and accelerated long-term economic growth. Several changes in recent years have resulted in a more successful fiscal policy, creating a more favorable market and economic climate and strengthening the position of the private sector. Economic reforms remain a principal priority for decision-makers amid rising oil prices and revenues.

Additional steps have been taken to develop a broad legal and economic framework that appeals to foreign investment, in line with a free-market orientation and an outward-looking economic strategy. In the 1990s, the Qatari government began to revise its legislative structures to ensure a sufficient and free inflow of foreign capital. Law No. 25 of 1990 approved the engagement of non-Qatari capital in a broad range of previously exclusive Qatari economic activities. In 2000, the government of Qatar amended the legislation regulating the legal and economic environment and allowed foreign investors to own 100% of all ventures. Exceptions to this are banking, insurance, and general trade, where a partnership of at least 51% is still required. The government has also adopted regulations on intellectual property and lowered tariffs to comply with the requirements of the World Trade Organization (WTO) (El-Mefleh and Shotar 2008).

In selecting the macroeconomic indicators for this analysis, two key attributes have been taken into consideration: their procyclical and countercyclical nature. This involves the movement of an indicator in comparison to the broader economy. For instance, the unemployment rate is considered countercyclical because it moves in the opposite direction to the economy, whereas gross domestic product (GDP) is deemed procyclical because it moves in the same direction. The former decreases with good economic performance while the latter increases when the economy thrives. Accordingly, two of the macroeconomic indicators highlighted in this analysis are GDP and the unemployment rate. It is also important to note that, according to the U.S. Energy Information Administration (EIA 2015), "Qatar is the largest exporter of liquefied natural gas (LNG) in the world, and the country's exports of LNG, crude oil, and petroleum products provide a significant portion of government revenues." In this light, the analysis also examines the country's crude oil and natural gas exports over this 25-year period.

Annual GDP Trends (1995–2020)

GDP is one of the most important indicators for understanding Qatar's economic growth over the last 25 years. It is, in essence, a lagging indicator. The country's GDP has generally been on an upward trend since 1995, albeit with a significant slump in 2014, 2015, and 2016. Between 1995 and 2000, Qatar experienced substantial GDP growth — from $8,138 million in 1995 to $17,760 million in 2000. This can be attributed primarily to the significant rise in global demand for oil during this period (Yancken and Wilkinson 2001:44).

The growth in GDP was sustained in the years 2000 to 2010. However, the trajectory of GDP growth was interrupted in the following decade (2010–2020). The slump in 2014, 2015, and 2016 can be attributed to the drop in oil prices between 2014 and 2016 (Stocker, Baffes, and Vorisek 2018). Significantly, a blockade was also imposed on the country in 2017 (Hussein 2017). However, it is clear from the data that Qatar was able to weather the effects of the blockade, with marginal GDP growth recorded in both 2017 and 2018. In the final analysis, it is important to bear in mind that Qatar's GDP relies heavily on its hydrocarbon sector. According to an IMF (2019) report, a significant portion of its GDP can be attributed to this sector. The economy has undergone significant sectoral change over the last few decades, primarily as a result of the Qatari government's major initiative to grow and diversify its economy.

Wage Levels and Income Inequality

Qatar set a minimum wage in 2017 at QR 1,000 per month, with an additional QR 500 per month for accommodation and QR 300 for food, to be provided by the employer (Sergon 2022). The average monthly salary for workers is QR 15,700. Indicative salaries for selected occupations are as follows:

There is also a significant income gap between high-income expatriates from Europe and low-income expatriates from Pakistan, who may earn as little as QR 1,000 per month (Sergon 2022).