Future prospects: | Global finance magazine

Global Finance: How was 2020 for Qatar?

Abdulla bin Saud Al-Thani: Qatar has weathered the negative impact of the Covid-19 pandemic and is well positioned to bounce back from the global economic downturn. Qatar’s economy is particularly resilient and the country is prepared for unexpected economic shocks. In order to contain the spread of the pandemic, all social activity in Qatar has been suspended for a limited period; but national economic activities continued with social distancing norms. With this, we expect the containment measures to have a limited impact on the second part of the economic output of the year.

GF: What was your response to the Covid-19 crisis?

Al Thani: Last March, His Highness the Emir Sheikh Tamim bin Hamad Al-Thani announced a $20.6 billion policy package to counter the economic and financial effects of the pandemic. Following these directives, QCB [Qatar Central Bank] taken the following measures:

We have asked all banks to defer loan installments and repayment obligations for six months, starting in March 2020, without charging any commission or late fees and without negatively impacting credit rating. The government will allocate local bank guarantees amounting to $1.4 billion to provide interest-free loans to help affected private sector companies pay salaries and rents. To manage the liquidity needs of banks, due to the deferral of loan disbursements and other support to the private sector, a redemption window of $13.7 billion has been allocated, at a zero interest rate for hundred.

To improve social distancing, we have launched the Qatar Mobile Payment System, which enables secure direct electronic payments. We also asked financial institutions not to charge point-of-sale fees or ATM withdrawal fees. In addition, QCB lowered its policy rates twice in 2020. Specifically, QCB cut the deposit and repo rate by 100 basis points (bps) each cumulatively to 1%, and the lending rate by 175 bps combined at 2.5%.

Our banking sector is well positioned, with deep capital buffers, strong profitability and liquidity to withstand the stress of current challenges. Moreover, with the above measures, we should be able to minimize the stress in the national economy.

GF: What are the lessons learned from this crisis?

Al Thani: Several lessons have emerged from the crisis: First, the pandemic has accelerated digitalization. In the long term, Covid-19 is likely to give the local fintech industry a boost.

At the same time, the crisis is forcing central banks to improve their risk management framework and business continuity plans. There is a need to plan for the mitigation of operational risks to the financial system by coordinating with all relevant authorities and stakeholders. The central bank’s stress-testing framework for the banking sector could include Covid-19-like crises as a plausible scenario for the future. Finally, we have learned that investments in public health infrastructure must be continuously maintained to safeguard economies and protect human capital.

GF: Where do you see growth opportunities?

Al Thani: The hydrocarbon and other sectors are expected to play a role in the Covid-19 recovery process. Fiscal and monetary stimuli, as well as the gradual reopening of the global economy, will provide the necessary boost to the hydrocarbon sector by increasing energy demand and prices. Additionally, OPEC+ production cuts will help drive up energy prices. With regard to the non-hydrocarbon sector: While the recovery in the hydrocarbon sector itself will play a catalytic role, the fiscal and monetary stimuli announced will give a boost to the recovery of the national economy.