Dr Haitham Al Salama Chief Economic Adviser QFC Authority
DOHA: Tomorrow, the Qatar Financial Centre is set to officially release the first Qatar PMI. The newly launched report, compiled by IHS Markit, will provide an important source of timely information on the health of Qatar’s economy. Indeed, the Qatar PMI data collected since April 2017 reveals the resilience of the non-oil private sector over the past year, which is in line with the statistics released by the Ministry of Development Planning and Statistics (MDPS).
In June 2017, neighboring countries abruptly cut off diplomatic relations with Qatar and imposed restrictions on trade and travel. QFC Qatar Purchasing Managers’ Index (PMI) – a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy immediately picked up the impact of the blockade. The seasonally-adjusted headline PMI dropped below the neutral 50 level to 47.5 in June, reflecting a significant proportion of non-oil private sector companies reporting a fall in output and new business.
The economy regained growth momentum at a remarkable pace following the deterioration in business conditions. The Qatari economy has weathered the challenges with strength and resilience, thanks to swift government responses. The deterioration in business conditions due to the embargo remained as transitory, and new trade routes were quickly established. The situation has acted as a catalyst for enhancing domestic food production and reducing reliance on a small group of countries, as pointed by the IMF in the recent Article IV mission statement.
In August 2017, the PMI returned to expansion territory, scoring above the neutral 50.0 mark. The improvement in business conditions was partly driven by an increase in output as seen by the positive correlation between the economic growth registered by the PMI and the official statistics released by MDPS.
As we look further into the sub-indices of the PMI, we find evidences on the rapid response to the economic challenges faced with the blockade. After the depletion of input goods buffer held at suppliers, a reduction in the suppliers’ delivery times appeared, leading to a decline in business output. Meanwhile, input price index increased due to supply shortages. By October, Qatar’s economy started to show signs of adjustment to new conditions as companies found alternative suppliers that sourced input goods by air and sea via the new Hamad seaport. Both output and new orders rose remarkably, as companies responded to restrained demand from the summer. The upward movements in the sub-indices contributed to a rise in headline PMI figure, reflecting a sharp improvement in business conditions.
Although there was an immediate impact from the blockade, the situation has stabilized quickly as evidenced by the firm headline PMI figure hovering in the growth territory for eight months in a row, thanks to quick action by the government.
