Summary: KEY ISSUES Context. Qatar is implementing an ambitious diversification strategy through a large public investment program, while retaining its systemic role in the global natural gas market. The policy framework is being strengthened in a number of areas, including fiscal and financial policies. Growth is expected to remain strong this year, but will slow going forward. The recent large drop in oil prices will lead to a substantial deterioration of the fiscal and external balances. Focus. This year’s consultation focused on these key issues: 1. Living with cheap oil. Qatar’s public finances remain sustainable at expected oil prices, but in contrast to the recent past, projected budget balances no longer appear consistent with intergenerational equity. Measures to improve the budget balance by 5 percent of non-hydrocarbon GDP should be implemented gradually over the medium term. Policymakers should specify clear medium-term fiscal objectives, make the annual budgets binding, and further increase transparency of fiscal accounts. The prospects of persistently low oil prices and slowing medium-term growth also call for intensification of diversification efforts through further improvements in the business environment, higher education quality, and labor market reforms, which would also make growth more inclusive. 2. Risks from public investments. The ongoing investment program is essential for economic development, but entails a risk of overheating the economy in the near term, while creating overcapacity over the medium term. Recent progress in improving public investment management to tackle these risks is welcome. Consideration should be given to raising the real estate transaction fees to deter speculators and further increasing land supply. 3. Financial sector. Banks remain sound and the financial regulatory agenda is moving ahead, but emerging risks and vulnerabilities need to be carefully monitored. These include rapidly growing credit to selected sectors and across the border. Further enhancements to the early warning system, including improving availability of real estate statistics, are needed.

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