How is Qatar Reacting to Low Oil Prices?

As part of the plan to counter the impact of the oil price shock to its economy, the government of Qatar was restructured in January 2016. Austerity measures are already being taken to counter the wasteful spending, overstaffing and lack of accountability. Following years of surpluses, Qatar is estimated to run a budget deficit of $8 billion, equivalent to 5% of GDP in 2016 —the smallest among the GCC countries. Yet, given that the budget planners in Doha calculated oil at $48, Qatar’s deficit may actually increase.

Other signs of cheap oil harming the economy was the growing cost of Qatar Petroleum (QP) and Royal Dutch Shell, which led to the latter’s pulling out of the $6.4 billion al-Karaana petrochemicals project. The QP also laid off about 1,000 employees.

To finance budget shortfalls, Doha officials have recently implemented measures such as hiking utility rates, doubling fines for wasting water, and increasing the cost of Qatar’s postal services for the first time in eight years. On January 14, 2016, Qatar’s state-owned fuel company, Woqod, announced a 30% hike in gas prices, causing a liter of unleaded gas to reach $0.36. The subsidy cut went into effect only hours after the announcement. The last time Qatar raised gas prices was in 2011. Woqod’s price rise in January came on the heels of Bahrain, Oman and Saudi Arabia also cutting gas subsidies. With more austerity to come, Qataris are expecting cuts in electricity subsidies later this year. New cuts and price increases will likely fall hardest on expatriates.

Qatar also ordered state-owned institutions such as Qatar Museums and Al Jazeera to reduce their programming and/or lay off expatriates. Officials slashed the Qatar Foundation budget by 40% and made significant cuts at Western academic institutions in Education City. Last December, Sidra Medical and Research Centre cut hundreds of jobs and officials have put the brakes on plans to roll out a national health care scheme. The Qatari Tarsheed initiative penalizes households for lighting buildings at night.