Proposals to change Qatar’s sponsorship and exit permit laws could further improve labour market efficiency, the Institute of International Finance (IIF) has said in a report.
Electronic payment of wages and adoption of unified accommodation standards could “address concerns regarding work conditions”, IIF said in its report entitled “Qatar: the boom goes on”.
In Qatar, “unemployment is virtually non-existent”, reflecting rapid growth and the flexible supply of foreign labour, with expatriates constituting 90% of the labour force.
Qatar has scored high in competitiveness rankings in the Middle East supported by its open economy and robust macroeconomic environment, but has slid slightly relative to peers from the previous year.
In particular, the ranking for the ease of starting a business is relatively low and this may be an area that needs to be addressed to improve attractiveness as an investment destination.
In the report IIF noted Qatar has made “significant headway” in improving infrastructure capacity, such as the opening of the new airport, and this is expected to gradually alleviate concerns about supply bottlenecks and limit price pressures given the large number of projects underway.
The collapse in energy prices, which has already led to deferral of certain petrochemical projects, could delay the strategy to move up the value added chain in hydrocarbons, but the authorities are also aiming to position Qatar as a centre for conventions, retail, culture, sports, education, spas, ICT, and healthcare, and further inroads could be made in these sectors.
The collapse in energy prices has so far not had material impact on domestic economic activity, which is underpinned by rising fiscal expenditures. However, given Qatar’s position as a major producer of petroleum and gas, with output of about 2mn barrels per day in crude oil and other liquids and 2.9mn bpd equivalent in gas in 2013, most of which is exported, there will be a “negative impact” on external and domestic balances with the current account surplus projected to narrow to 3.6% of GDP in 2015, from 24.2% a year earlier.
Given that oil and gas is estimated to have contributed about 54% in direct fiscal revenues roughly equally in 2014, and with another 17% including dividends from companies related to the hydrocarbon sector, the energy price collapse will ripple through to lower fiscal revenues and result in a budget near balance after sizeable recent surpluses (averaging 9.9% of GDP per year during 2011-2014), IIF said.