Gulf crisis to impact Qatar’s economy
Doha’s trade and transportation sectors will suffer greatly, with further impacts on finance and investment. We will never know whether Qatari decision makers were aware of the dangerous repercussions that might unfold if Qatar continues its double standards and ambiguity in dealings with its brotherly Gulf Cooperation Council nations.
The Gulf countries were very patient before finally deciding to make the final decision and cut ties with Qatar — a decision that will lead to very heavy losses for Qatar’s economy. Despite the wealth enjoyed by Qatar, it might not be able to handle these losses as its economy deteriorates quickly and painfully.
The sector that will suffer the biggest impact is trade. Qatar’s trade with Gulf nations reached US$11 billion in 2016, constituting 86 per cent of Qatar’s trade with Arab countries and 12 per cent of its international trade.
The UAE, Saudi Arabia and Bahrain account for 85 per cent of Qatar’s trade with the Gulf, while Kuwait and Oman account for only 15 per cent.
Qatar’s export sector in particular will suffer the biggest losses. The GCC constitutes 80 per cent of Qatar’s exports to Arab countries, with the three Gulf nations accounting for 86 per cent, while Kuwait and Oman account for only 14 per cent.
Qatar-GCC mutual investments will also likely be affected.
All of Qatar’s trade through land, and a great deal of its maritime trade, will suffer, which can lead to a doubling of the country’s losses. This will have a destructive impact on Qatar’s economy and the living standards of its citizens and residents. It will lead to a shortage in commodities, a huge increase in prices and inflation, and a big decline in the volume of exports due to shutting down of production in some factories and plants. Another sector that will be impacted is transportation and its subsectors; land, air and sea, and in particular, Qatar Airways, which is a key contributor to the country’s GDP.
The closure of three neighbouring countries’ air space will force the airline to make major alterations to its routes, which will lead to rising costs. If the airline retains its current ticket prices it will become less feasible, and it will lose its ability to compete if it increases them. This threatens the company’s profitability, especially since Qatar Airways relies heavily on the transport of passengers from the UAE, Saudi Arabia and Bahrain. At the same time, land transportation will stop completely, resulting in heavy losses.
The third sector that will most probably also collapse is the financial sector, particularly Qatar’s Stock Exchange, which plummeted by more than 8 per cent on Monday.
The stock market lists many shareholding companies that operate in the transportation and industry sectors. This will lead to escape of capital, not just foreign capital, but also local capital, especially since Moody’s had downgraded the credit rating of Qatar and its major firms in May. On Monday, Moody’s said GCC nations cutting ties with Qatar will once again threaten the country’s credit rating, pointing out that it is a dangerous development, and if it does occur, then that will lead to a rise in borrowing costs and a drop in foreign investments. All these repercussions, and many others that this space will never be able to contain, will have a massive impact on growth rates, which will further decline after being already affected by the drop in oil and gas prices.
This means there are hard times ahead for the Qatari economy, which will remain isolated and under endless pressure. Is supporting a terrorist organisation, like the Muslim Brotherhood, really worth all these sacrifices that will affect Qatar and its citizens? This is a question that the Qatari leadership must dwell on for a very long time.
Qatar persisted with its support despite the Gulf’s patience, and Qatar fully knew that the Brotherhood is another face for the dictatorship regime in Tehran, as evidenced by the presence of Brotherhood, Al Qaida, Hezbollah and Taliban offices in Iran. The way out, and avoiding countless losses, is quite simple: Qatar should return to its brothers and the Gulf, which is inclusive, defends everyone’s interests and achievements, and stands against its enemies and their sectarian ambitions and expansionist plans.
(The writer is an UAE economic expert and specialist in economic and social development in the UAE and the GCC countries)