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.