Country Risk

Qatari economy under strain despite claims to the contrary, increasing likelihood crisis will end on Saudi terms

15 September 2017

Key Points

  • Qatari economic indicators are deteriorating as the economic and political boycott enters its fourth month, raising the likelihood that any eventual resolution will favour the position of Saudi Arabia and the UAE.
  • Mutual unwillingness to agree on the conditions of mediation increase the likelihood that the crisis will continue through to the end of 2017.
  • US engagement appears to be more aligned with GCC3+1 demands to confront terrorism financing.


On 12 September, the Qatari stock market dropped to its lowest level in 52 months, an indication of the negative economic effect of the continued boycott of Qatar by Gulf states and Egypt.Saudi Crown Prince Mohammad bin Salman (left) and Qatari Emir Tamim bin Hamad al-Thani (right). (Fayez Nureldine/AFP/Getty images)Saudi Crown Prince Mohammad bin Salman (left) and Qatari Emir Tamim bin Hamad al-Thani (right). (Fayez Nureldine/AFP/Getty images)

The stock market has lost more than 14% of its value since the boycott, imposed on it by a Saudi-led bloc on 5 June, began. Foreign reserves dropped more than USD10 billion (from USD34.8 to USD24.4 billion) during the first month of the political rift as the Qatari government attempted to alleviate pressures created by deposit withdrawals from the boycotting Gulf Cooperation Council states of Saudi Arabia, UAE, and Bahrain, plus Egypt (GCC3+1).

The Qatari Central Bank has not yet released the foreign currency reserve figures for July, which are typically published at the end of each month. There has been no explanation from the Qatari government, even allowing for a delay in deference to the Eid al-Adha religious holiday.

If the data is being delayed out of acknowledgement that reserves are lower than expected, its eventual release will probably undermine confidence in Qatar’s capacity to economically endure the boycott into 2018 without significant policy changes, such as abandoning the Qatari riyal’s peg to the US dollar or limiting imports. A decline in reserves while foreign-owned banking deposits are withdrawn would raise funding costs for domestic banks and private enterprise. The peg of the riyal to the dollar is currently not under threat, but pressures on it are likely to mount as investors short the riyal.

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