Justin Alexander, Consultant for Doha-based MENA Consultants, Director of Khalij Economics and GCC Analyst for Global Source Partners, is an expert in regional macroeconomics and geopolitics with 25 years of experience living and working in the Middle East. This piece, titled “Qatar – economic impact of the war”, discusses the significant economic impacts of the war on Qatar, outlining the resulting downward revisions to GDP forecasts for 2026, the expected but less severe impact on public finances, and the mixed economic data reported in March. The article also highlights that sovereign credit and market confidence in Qatar remain strong despite the crisis.
- Qatar’s GDP grew by 2.9% in real terms in 2025, and before the war, the expectation had been that this would rise to between 4-6% in 2026, depending on when the first North Field East LNG trains began production.
- However, the impact of the damage to two LNG trains and the shutdown of production from the other trains, along with much of Qatar’s downstream industries, has resulted in the largest downward revisions in forecasts for any Gulf state during the war. There remains uncertainty about how the war will impact on the timeframe for each of the eight new LNG trains or the repair of the two damaged trains.
- Recent GDP forecasts for 2026 now expect contractions of between -5.1% (S&P) to -8.6% (IMF), with rebounds expected in 2027 ranging from 5.3% (S&P) to 8.6% (IMF).
- The impact on public finances is expected to be more muted. This is partly because of lags in public revenue; for example, dividends from Qatar Energy and corporate income tax payments received in 2026 relate to 2025 results. It is also partly because once Hormuz reopens for Qatar, it is expected that commodity prices will be materially higher than had been envisaged before the war. There are also expectations from some forecasters that public spending may be reduced. The overall impact means that the fiscal deficit in 2026 is only forecast to be between -1.9% of GDP (S&P) and -3.4% (Moody’s and the IMF). There is more divergence in subsequent years, with the IMF forecasting deficits in 2027 averaging – 3% of GDP, whereas S&P expects a quick return to surpluses that average 5% over those three years.
- Inflation is expected to rebound from 0.5% in 2025 to between 3.3% (Moody’s) or 4.0% (S&P) in 2026. Prior to the war, expectations were in the range 1.3%-2.0%.
March economic data is mixed
• The monthly trade balance turned negative in March for the first time on record, registering a -$1.2bn deficit on $1.7bn in imports but only $0.5bn in exports. Exports were down by -97% m/m and imports were down by -47%.
• The Purchasing Managers Index, a useful third-party check on the health of the private sector, suffered its sharpest ever monthly decline, dropping by -12 points (-24%) to 38.7, the second lowest on record, after the May 2020 reading during the pandemic.
• Inflation jumped to 4.2% in March, a three-year high. The monthly increase of 0.8% was driven largely by food, up 69% because of supply chain challenges. Fuel prices in March did not reflect the surge in oil, but this fed through a little into some components of the transportation component, which saw an overall 1.6% m/m increase, the most in over two years. Other components of the CPI were fairly muted m/m and will respond to the crisis with a lag.
• Monetary and banking data from QCB for March show minimal impact from the war. Some small signs of unease may be that cash in circulation rose by 13% m/m, and foreign currency deposits jumped by 8% m/m, having been largely flat for two years. However, these are minor items and, importantly, there was no deposit flight from banks. In fact, residents’ deposits surged by 2.8% to a new record level. This was driven almost entirely by public sector deposits, but private deposits also increased slightly. Also, international reserves were
nearly unchanged at $56bn.
Sovereign credit remains strong
• S&P affirmed the sovereign rating at AA (Stable) on 1 May, despite a significant deterioration in its forecasts for this year because of the war.
• Fitch placed Qatar on Rating Watch Negative on 8 April. The rating review will probably be completed in May or June. A change in rating or outlook for the sovereign would also be applied to the banks.
• Qatar’s credit default swaps, a measure of the risk of insuring against default, only rose slightly during March and have eased back to nearly pre-war levels, indicating confidence amongst investors.
• In other signs of market confidence, Qatar sold $3bn in 7-year bonds on 1 April, the first GCC state to do so during the war, in a private placement. Its QR3bn local bond/sukuk issuance saw strong demand and was nearly 3 Ɵmes oversubscribed.
Government policy responses announced
• QCB announced a financial sector resilience package at the end of March. This included unlimited repo against eligible securities, expanding the repo period from overnight to up to three months. There was also a reduction in the deposit reserve requirement to 3.5% from 4.5%. It also permitted banks to offer borrowers up to three months of loan service deferral. Qatar Development Bank is offering this deferral to its own customers.
• The Ministry of Commerce & Industry has coordinated with suppliers to reinforce supply chain resilience, with a focus on food security and essential goods.
• A package of business relief measures was rolled out by QFC and QFZ, including rent waivers, payment deferrals and lease extensions for affected tenants, plus extensions on filing audited financial statements and case-by-case adjustments to tax filing timelines.
• Invest Qatar is seeking to reinforce investor confidence by highlighting incentives to companies entering Qatar, which were in place before the war, including 40% reimbursements of local setup costs.