Qatar’s economy is suffocating … and huge inflation in daysTruth Consultancy
The crisis has revealed its fragility
• Abu Dhabi – Abdel-Hai Mohamed – Cairo – Mohamed Khaled
Date: 11 June 2017
Qatar’s economy will be in a state of severe suffocation in a few days because of its boycott by Saudi Arabia, the United Arab Emirates and Bahrain, where the current crisis has revealed how fragile it is, economists said.
They explained that the decision of the three Gulf countries to close their air, land and sea borders with Qatar will lead to a severe scarcity of food commodities, whether strategic or complementary, explaining that the boycott decision was characterized by surprise and rapid speed, which lost Doha the ability to store large quantities of basic food items such as rice, flour, sugar and oil Where markets will witness a sharp wave of rising prices to include all types of consumer goods, especially food.
Qatar has imported about 90% of its food imports from Saudi Arabia and the UAE in particular, pointing out that the sudden decision of the province has had a clear impact over the past few hours as thousands of citizens and residents of Qatar have moved to the major malls to buy the largest quantities of food in anticipation of any expected scarcity.
Experts stressed the negative effects of the boycott on the Qatari economy, which began to witness unprecedented declines in currency and money market, in line with the growing fear within the Qatari street of shortages of commodities.
This comes amid the limited alternatives that Qatar can use to avoid the effects of the boycott on its economy, experts say, pointing to a fall in the riyal to its lowest level in 11 years. Experts also stressed Qatar’s strong appeal for foreign investment.
Reda Mosallam, a partner at Trout Economic Consultancy in Abu Dhabi, said that the scarcity will first appear in foodstuffs, which are especially in demand during Ramadan, especially meat, poultry and fish. In the next few days, Saudi Arabia has closed its border with Qatar, noting that this border is the only effective and almost effective outlet from which vegetables, fruits and meat from Jordan, Syria, Lebanon and Egypt enter.
“It is expected that many commodities will witness a severe scarcity in the coming days, which will lead to higher prices and the creation of dangerous and frightening waves of inflation will inevitably suffocate the Qatari economy.
Reda Mosallam notes that the continued closure of the Saudi border with Qatar will force Qatar’s ruling power to rely more on the air, which will increase the cost of imported goods and will require new suppliers to supply goods quickly.
But the problem here is that the length of the siege will be very painful and difficult, explaining that land transportation is the best and cheapest to transport goods and foodstuffs, especially vegetables and fruits, and Qatar depends on the outside in providing the majority Its living needs as it is a consumer country with excellence and has no domestic production and depends mainly on Saudi markets.
The long queuing scene in front of shops in Qatar to buy food for storage, fearing that the markets will continue to decline for many days and will show categories of greedy traders and the Qatari government may not be able to control the situation and Qataris who have been in prosperity for years will not be too patient on this The real strangulation of their economy.
“If the crisis with Qatar does not resolve within a few days, the Qatari economy will be hit by severe suffocation, which will inevitably have serious consequences for citizens and residents of Qatar,”
The crisis is escalating
A member of the Economic Committee in the Egyptian House of Representatives MP Bassent Fahmy said the statement that the impact of the Arab boycott appears in the short term on the Qatari economy clearly and things are likely to worsen if the crisis continues, to be affected by the economy fully, but expected that things will be resolved and resolved soon.
The parliamentary and the Egyptian economic expert stressed that the boycott has a significant impact, especially on the availability of internal goods in Qatar, and the seriousness of the matter on the internal economy depends on the extent of preparations by the Qatari government and the nature of the strategic plan of confrontation, especially as Qatar is a rich country.
“The boycott is a big threat to the economy and the people and the government are suffering. The Qatari currency is clearly affected and demand is low. The Qatari capital market is heavily affected and is experiencing exits because of the lack of confidence and concerns about the state of the Qatari economy,” she said.
The fragility of the economy
The crisis in Qatar revealed the vulnerability of the Qatari economy. This was hinted at by the head of the Economic Group of Future Future Party, the Egyptian economist Dr. Fakhri al-Faki, who pointed out that the Qatari economy is heavily affected by the Arab boycott. Which appeared quickly on the Qatari stock indexes, which witnessed sharp declines immediately after severing relations with Doha, and the exit of hot funds outside Qatar, pointing out that the decisions to stop dealing with Qatari banks would also affect the disruption of opening import credits and thus adversely affect the flow of imports The receipt of goods, which leads to unprecedented price rises.
Fakhri al-Faki also pointed to the danger of Qatari citizens and their presence in shops and banks, all of which are a sure sign of the seriousness of the Qatari economy, despite Doha’s strong cash reserves that could enable it to face the boycott. The crisis that will be experienced by the Qatari media, especially the sports channels, which is reflected in the reality of the Qatari economy, side by side and losses of up to 50% of Qatar Airways after the closure of airspace and sea in the face.
The attractiveness of the Qatari economy to foreign investments was strongly shaken.
The Egyptian economic expert Annayat al-Najjar said that in light of the limited options that Qatar can resort to, especially as it does not produce anything, there are serious negative effects in the Qatari economy on a number of axes, starting from high prices and increase inflation, referring to the scenes of flow of Qataris on the shops for sensing The danger, which confirms the high rate of inflation, the people feel that it is rich people but may not find what they buy basic goods.
“The problem of commodities is the most severe so far,” said Anayat al-Najjar. “Even if Qatar has replaced neighboring Gulf countries in commodities and resorted to other countries like Turkey, it is more expensive and time-consuming. Expected a decline in the credit rating of the state. At a time when Doha’s attractiveness to investments will decline markedly as no investor can bet on a country whose neighbors are boycotted and whose economy is threatened, warning of a sharp decline in investment flows.
The Egyptian economist, Dr. Mukhtar Al-Sharif, said that the current boycott affects Qatar very much, although Doha has a number of alternatives that it seeks to use either through its reserves or through its support by Turkey and Iran.
He pointed out that the Qatari currency will continue to decline sharply so as the current crisis, until the crisis is resolved and remedied, and the Qatari economy has completely attracted investment, especially in the financial sector.
He pointed out that the main and quick problem is now the crisis of consumer goods not available, as well as the impact of various financial transfers, in addition to the impact of cutting lines of maritime transport, air and land, so as to impose a blockade against Qatar to retreat from its policy. He said that this is not the target of the Qatari people, but it is related to the Qatari state policy, which must have absorbed the lesson well.
It has confidence
For his part, economist Nasser Qalawun believes that the current crisis will push prices to increase in the medium term. There is a lack of trust, which is important in economic transactions and bank borrowing. Overemphasized the confidence within the economy and pushed it out of the strategic reserve to support food. Commodity prices will rise and increase inflation if the crisis lasts more than a month.
He added that any policy crisis affecting the stock market first as the Qatari currency fell and the prices of shares of international companies that have a presence in Qatar such as Vodafone. There will be a need for greater guarantees in terms of deals and actions by international companies. Two months later, these companies may have to seek compensation from the Qatari government for their losses because the crisis is imposed on them and caused losses. Here the government will be a guarantor in addition to insurance companies. Here, the Qatari sovereign fund is largely used.
“There are investments for major companies and individuals. In the gas and oil sector there are foreign companies such as Shell and I do not expect to break contracts for companies in the short term and thus major companies isolated from the crisis so far. Service companies, such as oil and energy service companies, switching suppliers may disrupt their businesses to reduce service efficiency.
LONDON (Reuters) – Investors in Qatar fear the Gulf conflict could continue, adding to pressure on Qatar’s currency if Qatar’s revenues are hit by a drop in trade and with foreign investment starting to pull out of Qatar, the Financial Times reported.
Fitch warned that a longer period of conflict could have serious effects on inflation, trade, tourism and economic growth.
The Financial Times newspaper reported that Qatar Airways is facing significant losses as the conflict continues.
The dispute is bound to affect Qatar’s preparations to host the World Cup as a result of rising interest on loans to host the World Cup, the newspaper said. She pointed out that it is expected to increase the costs of construction, which increases the rate of inflation, which will suffer the sectors of production, service and consumption, and reflected negatively on inflation in the Qatari citizens as well as all residents and visitors.