Posted on July 22, 2017
Qatar's financial sector demonstrated its ability to maintain stability and not only resist but also grow in light of the current Gulf crisis caused by the siege imposed on the country, a statement from finance ministry on Thursday said.
Despite the measures taken by the siege countries such as closing all land, air and sea borders in order to negatively impact Qatar's economy and its financial capability, things went the other way. One of the main factors that helped the financial sector in the current crisis is the support of Qatar's wise leadership to economic diversification and entering in foreign investments to strengthen national income and raise the financial capabilities of Qatar, the statement said.
The official authorities played a greater role to contain the repercussions of the imposed siege. In a statement, Minister of Finance HE Ali Shareef al Emadi (pictured) played down the fear of the country's financial market crash, after Qatar's index fell 7.1 percent at the start of the crisis. Emadi explained that it is an understandable reaction and there is no need to worry since Doha has all the required means to defend its economy and currency.
The minister said Qatar's investment funds and reserves account for more than 250 percent of GDP, and he does not believe there is any reason to worry about the Qatari riyal. He stressed Qatar's satisfaction with its position, investments and liquidity in its systems, adding there is no need for the government to interfere in the market and purchase special bond. "Qatar remains one of the top 20 or 25 countries around the world in terms of economic rankings and is much better than some of the countries around it."
Strong reserves
Qatar's foreign investments and the government and private sectors' activities supported the GDP, that comes in parallel with Qatar's reserves of $340 billion and Qatar Central Bank's (QCB) reserve of $40 billion plus strategic gold reserves, while Qatar Investment Authority has about $300 billion in reserves. QCB Governor Sheikh Abdulla bin Saoud al Thani recently stated that Qatar's economy is capable of enduring any financial shock caused by the siege imposed by four Arab countries, stressing there is no cause for concern because Qatar has enough liquidity to address any shocks.
The governor said that there is more money coming in, especially that Qatar's oil and gas exports did not stop despite the siege imposed by neighbouring countries, which provides dollar inflows to meet Qatar's needs of foreign currency. He also said the long-term agreements signed by Qatar to supply its customers with oil and gas are sufficient to ensure continued liquidity without any problems, adding that the siege had no effect in this regard. Sheikh Abdulla stressed that Qatari banks have strong capital and assets and good liquidity. "There is no cause for concern as only an amount of less than $6 billion has left Qatar since the beginning of the crisis, which is"insignificant" given the size of the banking sector in the country," the governor added.
He recalled the Moody's report which said Qatar has a number of credit strengths and reaffirmed that the sizeable net asset position of the Qatari government and exceptionally high levels of wealth will continue to provide significant support to the sovereign credit profile for the time being. He stressed that the resilience of the Qatari economy is supported by its strong financial position and solid financial fundamentals. "The banking sector is responding favourably to shocks; and the growing demand for credit from different sectors is not at risk", he noted.
The QCB governor said the quality of Qatari assets, which is considered one of the strongest assets in the GCC, has reduced the pressure on capital on the allocation of non-regular debt, so the financial sector in the country is improving thanks to the growth of many sectors, including the insurance sector through the issuance of new regulatory instructions to facilitate growth.
Positive market
The economic diversification has had a positive impact on resisting the negative effects of the imposed siege which were reflected in the fall of the Qatar Stock Exchange (QSE) index due to the exit of some investment portfolios, which is the matter the siege countries relied on to break the economy. However, the investors' faith in the economy, its robustness, and diversified investment portfolios in Qatar's stock exchange, as well as the attractive incentives offered by Qatari companies on dividends, played a major role in the rise of the index once again.
QSE CEO Rashid bin Ali al Mansoori said the stock exchange strongly challenged the siege, as it has investors from 155 countries as well as hundreds of requests to open accounts in the Qatari market. Mansoori added it is normal for the index to decrease at the beginning of the siege due to the exit of some investment portfolios, however this crisis eased the entry of foreign investors in direct investments in the stock exchange, and that comes due to the global eagerness to enter the QSE due to its robustness, economical diversification, opportunities and good prices which are all attractive factors in such situations.
Mansoori stressed the liquidity increase in the stock exchange reflects the positive outlook it receives from foreign investors, especially from the siege countries who did not face any restrictions nor has any restrictions been imposed on Gulf citizens investing in the Qatar stock exchange. "All investors are treated as Qatari citizens on the Qatari stock exchange and everyone is welcome," he said.
The rising index proves the investors' faith in the strength of the Qatari economy, Mansoori said, referring to the positive indicators that contributed to the increase such as the successful financial results of some listed companies and the announcement of a number of large logistic projects in the country.
source: Qatar Tribune