Over the last several years, Qatar has experienced significant continuous growth in the high real GDP. This has been characterized by an expansion of about 4.30% in the last quarter of 2013. These growth rates of GDP in Qatar occur through the reports made by the Qatar Statistics Authority. Since 2004, the GDP growth rate in Qatar has stagnated at 4.0% but in 2008, the rates went to a height of 14.4%. However, towards the end of the same year, the rates declined of -23.2%. These aspects have largely contributed to the growth of Qatari’s into one of the wealthiest countries in the world in terms of GDP per capita. The GDP in Qatar increased significantly in 2010 due to the increases in oil prices. This growth emanated from the investments made in the country’s gas sector. However, this growth came to a substantial decline of about 6.6% in 2012 when the gas expansion strategies ended.
Model of Growth and the main drivers
The economy of Qatar applies a policy, which focuses on developing the country’s non-associated natural gas reserves as well as increasing the private and foreign investment involved in the non-sectors. The model of growth in the country is built based on oil and gas, which make up more than 50% of the GDP. This is coupled with utmost 85% of earnings gathered from exports. Similarly, about 70% of revenues from the government that lead to the growth of the country into among the richest in the world.
The availability of resources such as oil and gas has largely contributed to Qatari’s growth into the world’s highest per-capita income country with the lowest rates of unemployment. This should be coupled with the contribution of the proven oil reserves that exceed in about 25 billion barrels that enable continuous output at current levels for the next 57 years. There are also proven reserves of natural gases in excess of 25 trillion cubic meters. This accounts for about 13% more than the worlds’ total and places the country as the third largest. The GDP purchasing power parity in the country as per 2012 was estimated to be about $ 191 billion. This was coupled with the GDP exchange rate of about $ 183.4 billion in the same year. The real rate of growth and the per capita rates associated with the GDP were 6.6% and $ 103,900 respectively.
Qatar had a Gross national saving of about 63% of GDP as per 2012 which was accompanied by a GDP composition by end use where a household consumption of 13.1%. The governmental rates of consumption were rated at 12.1% that was accompanied with investment in fixed capital at a rate of 30.6%. Qatar prides itself as a country that does not have any population living below the poverty line. These are the main drivers of the economy in Qatar include availability of raw materials and resources such as oil and gas.
Exchange rate system and the rate of evolution
Exchange rates are essential assets prices as they determine the trends of trade conducted through either exportation or importation. The exchanged rates in Qatar as per 2012 were estimated to be about 3.62 which is related to the United States dollar at the rate of USD1= QAR 3.62. This implies that the exchange rate in Qatar is pegged against the US dollar to set upper and lower limits for the Bank’s purchases as well as sales of dollars for the banks operating within Qatar. These rates provide the Qatar central bank with the mandate of determining the volume and time of sale of US dollars as well as the conditions related to similar sales and payments. The evolution rates in the exchange rates are effective in that they determine any changes that can cause substantial reallocation of resources and production between the tradable and non-tradable sectors of the economy. Hence, both the exchange rates and the rate evolution support the model of growth as they regulate the investments and sales that occur thus bringing more revenue to the economy.
The purpose of Central Bank
The central bank in Qatar supports the development initiatives in the country through ensuring prosperous economic development. This occurs through the mandate of the central bank to determine the volumes and the time of sales of the US dollars as well as the conditions associated with such payments and sales (Al-Shammari, 159). The purpose of this is that it allows the central bank to set the upper and lower limits of the prices that the currency can be purchased at in the country either by the locals or the foreigners (Al-Shammari, 159). This also allows the bank to set the prices that are favorable to the country’s economy in terms of bringing more income and attracting more investors (Al-Shammari, 159).
The Exchange rate of Qatar
The exchange rates in Qatar operate at fixed structures that have proven to be advantageous in that it facilitates trade and investment. They also provide a strong nominal anchorage, which presents a mixed picture on the status of domestic currency in the medium term with one approach that indicates an over-valuation rate of about 15% while others under-evaluate it at 2% (Fayad, 110). There is a macro-economic balance approach used in the country that accounts for the weaker side, the external sustainability (ES) approach on the other side focuses on emphasizing the inter-generational equity objective (Fayad, 110). These aspects indicate that current account aligns with the fundamental aspects. However, although the fixed rate in the country brings about more advantages, the currency used in the country is highly undervalued in terms of the real effective exchange rate (REER) (Fayad, 110). This is evidenced through the equilibrium real exchange rate (ERER) which gives a direct measure of potential real exchange rate misalignments that imply that the Qatari currency (Riyal) is highly undervalued.
Qataris’ financing spending
Qatar has a planned spending strategy where about billions of dollars are ventured into the development of infrastructure that entails a railway system, road network, and football stadiums (Fromherz, 73). The amounts approximated for these projects will be obtained from the local, regional and international investors who are expected to offer large amounts of money into the country’s’ economy (Fromherz, 73). The country has a high percentage of about 80% that involves workers and foreign residents obtained the population. This population benefits from the fortunes that are brought about by economic growth. They get to enjoy opportunities and outgoing remittances that are shared by the country (Fromherz, 73).
In 2014, I expect the country will boost their economy in terms of development and infrastructure where they will attract more investors who will stream in to grab opportunities in readiness for the 2022 world cup that will be held in the country. The central bank will standardize their exchange rates to ensure that they accommodate all foreigners, which must be accompanied by strengthening of the currency.
Works Cited
Al-Shammari, Nayef N. Exchange Rate Policy and International Trade Linkages and Impacts. N.p., 2007. Print.
Fayad, Ghada. Qatar: Selected Issues. Washington, D.C: International Monetary Fund, 2013. Print.
Fromherz, Allen J. Qatar: A Modern History. Washington, DC: Georgetown University Press, 2012. Print.
Qatar Business Law Handbook: Strategic Information and Laws. Intl Business Pubns USA, 2012. Print.
Qatar Mineral & Mining Sector Investment and Business Guide. s.l.: International Business Publications, 2012. Print.
The Qatar-Nepal Remittance Corridor: Enhancing the Impact and Integrity of Remittance Flows through Reducing Inefficiencies in the Migration Process. Washington DC: World Bank, 2011. Print.
Qatar: 2012 Article IV Consultation. Washington, D.C: International Monetary Fund, 2013. Print.
Report: Qatar 2008. S.l.: Oxford Business Group, 2008. Print.
