Abdulla bin Saoud Al-Thani, governor of Qatar Central Bank, looks back at the past year—and ahead to the next—with Global Finance.
Global Finance: How was 2020 for Qatar?
Abdulla bin Saoud Al-Thani: Qatar has weathered the negative impact of the Covid-19 pandemic and is well positioned to bounce back from the global economic downturn. Qatar’s economy is uniquely resilient, and the country is prepared for unexpected economic shocks. In order to contain the spread of the pandemic, all social activity in Qatar was curtailed for a limited period; but domestic economic activities continued with social distancing norms. With that, we expect containment measures to have a limited impact on the second part of the year’s economic output.
GF: What was your response to the Covid-19 crisis?
Al-Thani: Back in March, His Highness the Amir Sheikh Tamim bin Hamad Al-Thani announced a $20.6 billion policy package to counter the economic and financial effects of the pandemic. Following these directives, QCB [Qatar Central Bank] took the following measures:
We directed all banks to postpone loan payment installments and obligations for six months, starting March 2020, without charging commission or delayed fees and with no adverse impact on credit rating. The government will allocate local bank guarantees amounting to $1.4 billion to grant interest-free loans to help affected private sector companies pay salaries and rents. To manage the liquidity requirement for banks, due to the postponement of loan installments and other support to the private sector, a $13.7 billion repurchase window has been allocated, at a zero percent interest rate.
To improve social distancing, we launched the Qatar Mobile Payment System, which enables secure direct electronic payments. We also instructed the financial institutions not to charge point-of-sale fees and ATM withdrawal fees. In addition, QCB lowered its policy rates twice in 2020. Specifically, QCB reduced the deposit and repo rate by a cumulative 100 basis points (bps) each to 1%, and the lending rate by a cumulative 175 bps to 2.5%.
Our banking sector is well positioned, with significant capital buffers, robust profitability and liquidity to withstand the stress from the ongoing challenges. In addition, with the above measures, we should be able to minimize the stress in the domestic economy.
GF: What are the lessons learned from this crisis?
Al-Thani: Several lessons emerged from the crisis: First, the pandemic accelerated digitization. In the long run, Covid-19 will likely provide a boost to the local fintech industry.
At the same time, the crisis requires central banks to upgrade their risk management framework and business-continuity plans. There is a need to plan for mitigating operational risks for the financial system by coordinating with all relevant authorities and stakeholders. The central bank’s stress-testing framework for the banking sector may include Covid-19 type crises as a plausible scenario for the future. Finally, we have learned that investments in public health infrastructure must be continuously maintained to safeguard economies and protect human capital.
GF: Where do you see growth opportunities?
Al-Thani: It is expected that both hydrocarbon and nonhydrocarbon sectors will play a role in the Covid-19 recovery process. The fiscal and monetary stimuli, along with the gradual reopening of the global economy, will provide the necessary impetus to the hydrocarbon sector by increasing energy demand and prices. Furthermore, production cuts by OPEC+ will help in augmenting energy prices. With regard to the nonhydrocarbon sector: While the recovery in the hydrocarbon sector itself will play a catalytic role, announced fiscal and monetary stimuli will provide a boost as the domestic economy begins to reaccelerate.