Diplomatic crisis ‘a blow’ to Qatar's economy: report

CAIRO -16 August 2017: The diplomatic rift between Qatar and four Arab states, including Egypt and Saudi Arabia, have affected Qatar’s trade, investment confidence, and financial conditions, Capital Economics said Tuesday.

The 36 percent year-on-year decline in June’s imports disrupted economic activity in Qatar. It was the sharpest drop in 13 years, senior emerging markets economist at London-based think-tank William Jackson said in the report.

Disturbances in imports have led to higher food prices, which hiked from -1.9 percent in May to 2.4 percent in June and 4.5 percent in July, the London based think-tank explained.

“It seems likely that import disturbances will be temporary. Qatar has already started to re-route imports via Oman (rather than Dubai), and to source more food from countries such as Turkey,” Jackson noted.

As financial conditions have been sharply tightened in June, the foreign liabilities of commercial banks declined, fueling concerns about a potential struggle in external debts.

With regards to tensions in the interbank market, the rates have jumped, urging local banks to borrow more from the central bank and less from each other.

Jackson concluded that these negative impacts will not last; adding that tightening of financial conditions does not seem to have harmed banks’ lending.

Economic challenges faced by the small-sized Gulf state kept growing through June and July as the sea, land, and air boycott influenced investors’ needs and currency value.
As a result of the boycott that started 5 June, Qatar’s net international reserves declined 30 percent in June to $24 billion, according to the central bank figures.