Qatar will run its largest budget deficit in four years in 2021 as it tries to shake off the impact of the coronavirus and the drag of lower energy prices on government revenue.
The country will spend 34.6 billion riyals ($9.4 billion) more than it takes in next year, according to a statement from the Finance Ministry on Thursday. The projected shortfall for next year will be the largest since 2017, when countries including Saudi Arabia and the United Arab Emirates severed diplomatic ties with Doha.
Qatar’s deficit is expected to swell even though the world’s largest natural-gas exporter is planning to cut government spending by 7.5% from last year. The budget assumes oil prices will average $40 per barrel.
The government estimated last December that it would run a slight surplus for this year on the assumption that oil would average $55 a barrel, but revenue was hurt by the drop in energy prices. The shortfall for the first half of the year was 1.5 billion riyals and most economists expect Qatar to have run a sizeable deficit in 2020, the size of which is as yet unknown.
Governments across the Persian Gulf have been forced to tighten their belts as receipts from energy sales dropped and non-hydrocarbon economic growth stalled. In June, Qatar’s Finance Ministry told other government departments, institutions and entities funded by the state to cut their wage bills for foreign employees by 30%, allowing them to choose whether to cut salaries or make layoffs.
So far at least, economists’ most dire predictions about an exodus caused by job losses have not come to pass. The country’s population dropped by 2.8% between March and November, well below the 10% decline Oxford Economics had warned about in April for some nations in the six-nation Gulf Cooperation Council.
Qatar’s government expects to spend just 1.9% less on worker salaries next year than it had allocated in 2020.
(Adds details on 2020 deficit in fourth paragraph)
–With assistance from Abeer Abu Omar.