Qatar’s economy feels the pinch

Doha can’t have its cake and eat it. Qatar is either part of the fabric of the region and plays a constructive role in fostering an environment of coexistence, free of radicalisation, or it will continue to feel the pinch economically, not just politically.

The past month has been a watershed in the history of the GCC. If there is a lesson to be learned for Qatar, which has been trumpeting the need to adhere to international law and the protection of its sovereignty, it’s that unilateral policy decisions have repercussions.

The boycott has impinged on the sheikhdom’s economy. This week Moody’s, the rating agency, lowered its outlook on the country to negative, while Standard & Poor’s last month downgraded the sovereign credit rating of Qatar. Fitch has also placed the government on a negative credit watch. Qatar Airways, the country’s national carrier, has lost key regional markets, its transit business has slumped and its operational costs have surged as a result of the crisis.

Firms in the region and globally have realised it’s not business as usual. Investors have reassessed their positions. The riyal has come under pressure and though the country’s central bank has said it will back the currency, that does little to assuage investor uncertainty. The Qatari bourse has lost about $15 billion, or 10 per cent of its market value, according to Bloomberg estimates.

Notwithstanding belt tightening related to $200 billion of construction preparation for the 2022 World Cup, which Qatar is hosting, the country has had to reassess its supply routes now across the board. It remains to be seen how the sheikhdom can realistically continue to operate economically in such an environment.

Qatar has tried to give the impression that it is business as usual despite clear evidence to the contrary. Plans to increase gas production or make investments in US airlines may in the long term bear fruit, but they are clearly aimed at short-term public relations gains.

However, that does not change the palpable reality that the political crisis is eroding investor confidence in the country, its economy, its institutions and its creditworthiness. There is no doubt about that.