Qatar feels economic pains after boycott
doha — The Saudi-led alliance that severed ties with Qatar reinstated a list of 13 demands that must be met before talks to resolve the eight-week crisis could start, just as fresh economic data highlighted the impact of the unprecedented boycott on the Gulf nation.
Reserves drop
Qatar’s net international reserves dropped 30 per cent in June to 88.85 billion riyals ($24 billion), according to the central bank. Data released last week showed that foreign deposits at Qatar’s banks fell the most in almost two years last month as customers withdrew funds, pressuring liquidity available locally for businesses and the government.
The decline in deposits squeezed liquidity, so the central bank used reserves to “ease the crunch and to preserve the riyal peg against the dollar,” said Mohammed Abu Basha, a Cairo-based economist at EFG-Hermes, a regional investment bank. “But the drop is not that alarming in a wider sense” given that the reserves don’t include the foreign assets of the sovereign wealth fund, he said.
Imports slump
Qatar’s isolation has forced the nation to open new, more expensive, trade routes to import food, building materials and equipment. Imports also dropped 40 per cent compared with the same month a year ago.
“The disruption of trade routes will weigh on non-oil economic growth, which was already on a slowing trend,” Abu Basha said. “But even the new trade routes are likely to be more expensive than the older ones, which will affect growth and public finances.” To be sure, Qatar still boasts one of the world’s largest sovereign wealth funds, whose holdings include stakes in companies such as Glencore Plc and real-estate landmarks such as the Shard in London. The boycott hasn’t affected its exports of liquefied natural gas. Qatar’s benchmark stock index dropped 1 per cent at the close in Doha, the most in the Middle East before the announcement in Bahrain, signaling investors were expecting the Saudi-led alliance to escalate.
The countries at the heart of the crisis are all US allies. Saudi Arabia has strong counter-terrorism ties with the US and is a top customer for American weapons. Qatar hosts the regional headquarters for US Central Command, which includes an air base the Pentagon depends on to target Daesh. — Bloomberg