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The Economist: Decoupling of Qatar’s currency from the dollar is only ‘a matter of time’

Published: Updated:

Mohamed Abdel Majid, Middle East economic expert at the Economist Research Unit told Al Arabiya “the decoupling of the Qatari riyal from the US dollar is only matter of time,” advising investors in Qatar to “transfer some of their assets to other currencies.”

The Economic expert, editor of the Economist report on Qatar's economy, described the risks of the boycott as “weakening depositors' confidence in Qatari banks”, adding that “If the economic sanctions are tightened, some depositors will give up and withdraw their deposits from Qatar, which will further worsen the situation for the currency. Since Doha seeks to diversify the economy, it will consider decoupling the Qatari riyal from the dollar.”

Blocking oil ships

He pointed out that “the risks are limited in the near term because Qatar is able to export gas and oil, and this is the backbone of the economy, but in the long term it will face a major problem establishing confidence with the investors in the Qatari economy. If the crisis goes on, it will weaken the confidence of foreign investors who are now thinking hard before entering Qatar or pumping more investments.”

He warned that the economic boycott would turn into "preventing ships and the arrival of goods to Qatar, which will mean that businessmen and factory owners will start thinking about transferring some assets abroad because the risk ratio will be high, capital is a cowardly business and the businessman will not behave arbitrarily and can only endure such losses for a short time.”

He advised foreign investors to “check before doing business with Qatari partners and inquire about Qatari laws, especially if Qatar is subject to some type of financial control,” stressing the risk of “borrowing from Qatari domestic markets, with the lending from deposit ratio rising to more than 100% especially if the four countries withdraw deposits from Doha which will make liquidity very rare within Qatar.”

The Economist Report

The Economist's research unit predicted in a report that the Gulf sanctions would continue to have a long-term impact on Qatar's economy and will have dire consequences for Qataris economically, especially if Qatar adheres to its intransigent stance.

The Qatari economy will suffer heavy losses if the Gulf province continues their boycott, furthermore the citizens and residents of Qatar will feel the consequences due to the intransigence of the Qatari stance, which will create "a wider economic boycott."

The report recommends that foreign companies in Qatar check their partners' files in Qatar in the coming period, and look for new distribution channels, which will be expensive.

The report also advised foreign companies to hedge against the Qatari riyal exchange rate, in anticipation of the expected volatility of the riyal as the boycott continues.

He acknowledged that many financial institutions refused to deal with the Qatari Riyal.

The Economist's research unit's advice to foreign companies operating in Qatar included avoiding reliance on domestic financing if penalties were exacerbated.

Food companies

In another context, the report warned food retailers of low margins of profits if the government followed the policy of price control to counter rising inflation.

The tourism sector and hotels will suffer from the repercussions of the crisis, according to the report half of the tourists in Qatar are GCC residents.

As for construction companies, especially those operating in the 2022 World Cup projects, the report recommends that companies proceed with caution before implementing any agreement or investing large amounts, and expect a delay in receiving payments, especially if the government faces a financial crisis.

If Qatar is charged with terrorism, it would threaten hosting the 2022 World Cup.