Qatar's Economy Was Already Slowing Ahead of Saudi-Led Boycott

(Bloomberg) -- Qatar’s economic growth was slowing even before a Saudi Arabia-led bloc severed diplomatic and transport links in early June, as the world’s biggest exporter of natural gas felt the impact of lower energy prices.

Gross domestic product grew 0.6 percent in the second quarter ended June 30 from a year earlier, the Ministry of Development Planning and Statistics said on Sunday, compared with 2.5 percent in the January-to-March period. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt began a boycott of Qatar on June 5, closing its only land border and halting commercial flights.

The data show Qatar was suffering due to lower oil prices, which weighed on growth across the region. The slowdown is being exacerbated by the Saudi-led action, and economists expect Qatar’s economy to expand 2.5 percent this year -- the slowest pace since 1995. Saudi Arabia said on Saturday its own economy contracted in the second quarter.

Qatar’s non-oil economy grew 3.9 percent in the second quarter, the ministry said. Its mining and quarrying sector shrank 2.7 percent.

Saudi Arabia and its allies accused Qatar of destabilizing the region through its ties to Islamist extremists -- a charge the nation of 2.7 million people has repeatedly denied. Imports and foreign deposits have plummeted and interest rates soared since the boycott.