Understand how the economy of Qatar is and why the country is so rich

The World Cup that started on November 20 in Qatar will not be one more. This is due to its geographic location – and its climatic conditions, which forced the dates to change –, its form of government – ​​an absolute monarchy – and its state religion – Islam.

But there is another feature of this country located on a small peninsula in the Persian Gulf that makes it unique: its enormous wealth.

According to a list prepared this year by Global Finance based on GDP per capita, Qatar is the fourth richest country in the world, with US$ 112,789 per capita, behind only Luxembourg, Singapore and Ireland.

With slight variations, the truth is that this small emirate has been among the ten richest for at least the last decade.

But what is the source of their wealth?

Qatar’s economic prosperity is a product of the extraction and export of oil, discovered in 1939 and first produced in 1949, and natural gas – according to a report by the World Bank, the country has the largest reserves in the world.

Thus, the wealth of the small country is a figure of the last half century. Prior to World War II, Qatar’s population was involved in pearling, fishing and trading activities and, as a British colony, it was one of the poorest in the world. Currently, such activities are practically non-existent.

In the 1970s, a wave of nationalizations annulled the concessions that Qatar had made to companies such as the Iraq Petroleum Company (IPC), giving rise to the state-owned Qatar Petroleum (formerly Qatar General Petroleum Corporation).

Although the state company oversees oil and gas operations, it does not to the detriment of private companies, which continue to play an important role, according to information from Britannica.

According to the Global Finance report, Qatar benefits from proportions: oil and gas reserves are very large, while its population is very small (about 2.8 million people).

It is this relationship that has allowed the economic flourishing of this country of ultramodern architecture, luxury shopping centers and excellent cuisine that hosts the World Cup that ends on December 18th.

Oil and natural gas reserves

Qatar has huge deposits of natural gas. The North Field, offshore, is one of the largest gas fields in the world. The country’s oil reserves, found both on land and at sea, are modest by regional standards, but also significant.

The country began developing its natural gas resources in the 1990s in an attempt to reduce its dependence on oil. The strategy, in addition to resorting to international loans, has been to invest in joint projects with the main international oil and gas companies, with a focus on Campo Norte.

In the first decade of the 21st century, natural gas overtook oil as the largest source of government revenue and the country’s GDP.

Other income from Qatar’s economy

Despite the auspicious predictions of international organizations for Qatar, especially after the large investments around the World Cup, its economy is not free of risks.

The World Bank warned that some of them could be “volatility in energy prices and continued diplomatic tensions with its Gulf neighbors”.

“Diversification of the economy beyond hydrocarbons remains a key challenge,” the agency added.

The manufacturing sector is an example, as it is currently closely linked to its hydrocarbon resources. Qatar’s natural gas reserves are essential for the development of its liquefied gas industry.

At the financial level, the Central Bank of Qatar manages the state’s resources and issues the national currency, the Qatari Rial. The country has been generous in lending to troubled countries, particularly its Gulf neighbors and other Arab countries.

Just as Qatar exports oil and gas in its various forms and with its derivatives, imports consist of transport equipment, manufactured goods, food and live animals.

Britannica indicates that the services sector, including public administration and defence, accounts for approximately half of GDP and employs more than half of the workforce. The country has high military spending, which is almost four times the world average.

In an attempt to diversify Qatar’s economy, the government is working to develop tourism, mainly promoting the country as a venue for international conferences, though so far with little success.

It remains to be seen what the effects will be on this small but robust economy after the ball stops rolling on the football field.