Middle-east Arab News Opinion | Asharq Al-awsat

Diplomatic Crisis Shakes Qatar’s Economy, Financial Sector to Suffer the Most | ASHARQ AL-AWSAT English Archive 2005 -2017
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Traders speak with each other as they sit behind their desks in Qatar, Reuters

Riyadh – Amid a wave of negative economic inhibitors threatening Qatar’s national budget, the financial sector is set out to be most affected eventually resulting in an economic, trade and investment meltdown.

The collapse is an inevitable result of Saudi Arabia severing ties with Doha, followed by a boycott from seven other countries.

In the boycott’s fallout, and with 388 Saudi companies expected to leave Qatari markets, billions worth infrastructure projects are expected to be put on halt until further notice.

Among the first to heed the embargo are construction companies.

Qatar’s economy will lose billions of dollars—a Gulf’s $ 80 billion trade exchange advantage will be withdrawn because it is directly linked to Saudi trade.

With the embargo encompassing transport, Qatar carriers are looking at the loss of at least 50 flights with Saudi Arabia alone, economists told Asharq Al-Awsat.

“Saudi severing of ties with Qatar, which consequentially resulted in other influential boycotts, will reflect negatively on Doha’s economic movement—the embargo is a major economic setback as it freezes services previously provided by GCC countries,” economist Dr. Salim Bajaaja said.

The embargo after affecting Qatar imports that are largely used to support local infrastructure, entails rising costs which could cripple Qatar development.

Bajaaja pointed out that the effects do not stop at that, the boycott will end related projects, increasing Qatar’s expenses and manufacturing a deficit in the budget of Qatar for 2017, building up debt.

“The economic impact of this boycott will affect local currency and challenge central bank’s reserves to maintain the dollar-pegged price, especially as opportunists cast speculations on future rates in hopes of cashing in on them,” Fadel Bouneenen told Asharq Al Awsat.

Bouneenen said that the Central Bank of Qatar will be limited, especially after severing cooperation established with regional central banks, the Saudi Arabian Monetary Agency and the UAE Central Bank.

Commenting on closing borders and severing relations, Bouneenen said that it would force Saudi companies operating in infrastructure projects in Qatar to exit or stop work.

Closing terrestrial gateways would also have a negative effect on the country, which relies heavily on Saudi construction exports for its construction sector, he added.