Gulf economy hit
August 16, 2017 | Expert Insights
The sanctions imposed on Qatar by other Gulf states is causing food prices to steadily rise.
According to figures released by the government, the real estate market has also been affected in the country.
Background
In June 2017, Saudi Arabia, Bahrain, the United Arab Emirates and Egypt cut all diplomatic ties with Qatar. The countries also closed their borders and as a result of this, Qatar’s sea links, air links and road links have been cut off. The Saudi-bloc has accused Qatar of sponsoring terrorism and it’s a charge that Qatar has repeatedly denied.
In one of his first public speeches since the crisis unfolded, a defiant Al Thani said that Qatar has always been committed to fighting terrorism. He added, “We are open to dialogue to find solutions to lingering problems within the framework of respect for the sovereignty and will of each state as mutual undertakings and joint commitments binding all.”
The oil-rich nation has so far been able to assure the passage of basic goods to the region but it has also raised concerns. In August, it filed a legal complaint with the World Trade Organization challenging the trade boycott.
Analysis
Based on figures released by the government, due to the sanctions, Qatar’s imports have been slashed by a third in June 2017. The prices of basic goods have also increased. Prices for food and beverages have gone up by 4.5% from a year earlier. This is reportedly the sharpest rise in these products since 2014. They have gone up 2.4% from June 2017.
Real estate has also suffered as a result of the sanctions. Housing and utilities prices have fallen lower than they have been in several years. Prices have slipped 3.6% from what they were a year ago in July 2016.
However, the country has not been crippled by the crisis. Prices of non-perishable goods like clothing and furniture have dropped. This indicates that Qatar does not have a problem importing these items. Morale has also been relatively positive among businessmen and entrepreneurs. Mohamed Ammar, who heads the Qatari Businessmen Association said, “In the medium- to long-term, perhaps people who live here will feel" the effects, but for the time being, "we haven't felt any big difference".
Assessment
Our assessment is that there is significant trust deficiency in the current stand-off between Qatar and the Saudi-led bloc. In the fractious world of Middle East politics, where absolute monarchs trade on their bloodline and piety, family dissent is often stalled by dispersing privilege and cash. These are tumultuous times in the Arab world. The UAE and Saudi Arabia are both trapped in a costly open-ended war in Yemen. Plummeting oil prices are hitting both economies hard. Qatar, which is more dependent on gas, is better placed to manage its smaller population. We feel that Qatar will be able to hold out for a longer time than the Saudis.
The sanctions imposed on Qatar by other Gulf states is causing food prices to steadily rise.
According to figures released by the government, the real estate market has also been affected in the country.
Background
In June 2017, Saudi Arabia, Bahrain, the United Arab Emirates and Egypt cut all diplomatic ties with Qatar. The countries also closed their borders and as a result of this, Qatar’s sea links, air links and road links have been cut off. The Saudi-bloc has accused Qatar of sponsoring terrorism and it’s a charge that Qatar has repeatedly denied.
In one of his first public speeches since the crisis unfolded, a defiant Al Thani said that Qatar has always been committed to fighting terrorism. He added, “We are open to dialogue to find solutions to lingering problems within the framework of respect for the sovereignty and will of each state as mutual undertakings and joint commitments binding all.”
The oil-rich nation has so far been able to assure the passage of basic goods to the region but it has also raised concerns. In August, it filed a legal complaint with the World Trade Organization challenging the trade boycott.
Analysis
Based on figures released by the government, due to the sanctions, Qatar’s imports have been slashed by a third in June 2017. The prices of basic goods have also increased. Prices for food and beverages have gone up by 4.5% from a year earlier. This is reportedly the sharpest rise in these products since 2014. They have gone up 2.4% from June 2017.
Real estate has also suffered as a result of the sanctions. Housing and utilities prices have fallen lower than they have been in several years. Prices have slipped 3.6% from what they were a year ago in July 2016.
However, the country has not been crippled by the crisis. Prices of non-perishable goods like clothing and furniture have dropped. This indicates that Qatar does not have a problem importing these items. Morale has also been relatively positive among businessmen and entrepreneurs. Mohamed Ammar, who heads the Qatari Businessmen Association said, “In the medium- to long-term, perhaps people who live here will feel" the effects, but for the time being, "we haven't felt any big difference".
Assessment
Our assessment is that there is significant trust deficiency in the current stand-off between Qatar and the Saudi-led bloc. In the fractious world of Middle East politics, where absolute monarchs trade on their bloodline and piety, family dissent is often stalled by dispersing privilege and cash. These are tumultuous times in the Arab world. The UAE and Saudi Arabia are both trapped in a costly open-ended war in Yemen. Plummeting oil prices are hitting both economies hard. Qatar, which is more dependent on gas, is better placed to manage its smaller population. We feel that Qatar will be able to hold out for a longer time than the Saudis.
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