Preliminary estimates indicate that Qatar’s economy contracted by 2.5% YOY in Q1 2021, due to the contraction of the hydrocarbons, logistics, and construction sectors by 2.2%, 20.8%, and 4.7%, respectively. However, Qatar’s COVID-19 exit strategy has mitigated some uncertainty for businesses and helped stabilize demand across sectors. Non-oil private firms have collectively recorded further expansion in workforces and a sustained growth in purchasing activity, with the Purchasing Managers’ Index posting 54.6 in June. Qatar also proceeded with the third phase of the gradual lifting of COVID-19 restrictions on July 9 because 54% of the population is fully vaccinated, while 65% has received the first dose.
Our View
After fluctuating growth in H1 2021 due to tight COVID 19 restrictions, we expect real economic growth will average around 3.1% YOY in 2021 and 3.7% in 2022. Growth will be driven by an expansionary fiscal policy, higher natural gas production, relatively looser restrictions than 2020, and the blockade removal. Additionally, the acceleration of business activity in preparation for the 2022 FIFA World Cup should support headline growth. Revenues across sectors should see some recovery in H2 2021 as the government proceeds with the fourth and final phase of lifting COVID-19 restrictions on July 30th. However, the rise in input costs such as gasoline, labor, and raw materials will exert pressure on profit margins for the remainder of 2021 and could force some firms to pass on the higher cost to consumers.
Business Implications
B2C firms should see margin improvement into 2022 as employment, incomes, and confidence recovery drive consumer demand. B2C firms should continue to target the expat population, but plan for continued price sensitivity for the remainder of 2021, especially among some middle-income expats. B2G firms should see some stabilization of demand as oil prices remain above US$ 50/bbl. in H2 2021. B2G firms could benefit from tailoring their offerings to support the government’s diversification efforts. Prioritize sales into sectors that have been resilient in 2020, such as ICT and financial services, while also tracking the recovery in the retail, food services, and construction.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We provide the research, data, and insights you need to outperform the competition. Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.