(Bloomberg) -- Qatar said it expects its budget deficit to decline next year as the economy absorbs the impact of the Saudi-led boycott.
The gas-rich country expects the shortfall to narrow to 28.1 billion riyals ($7.6 billion) from 28.4 billion in 2017, the Finance Ministry said in an emailed statement. Spending will increase to 203.2 billion riyals, up 2.4 percent from 2017. Revenue is projected to increase 2.9 percent to 175.1 billion riyals, driven by non-energy income, the ministry said.
The data is the broadest indicator of how Qatar’s economy has performed since Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic and transport links with Qatar in June, accusing it of backing extremist groups. Qatar has repeatedly denied the charges and called for dialogue.
“The blockade has, if anything, added impetus to our economic diversification strategy,” Finance Minister Ali Shareef Al Emadi said in an emailed statement.
The projected deficit will be financed through debt sales. The 2018 budget is based on an average $45 per barrel, the same as 2017.
Qatar’s ruler Sheikh Tamim bin Hamad Al Thani said on Nov. 14 that the world’s biggest exporter of liquefied natural gas has absorbed the shocks of the boycott and is moving to speed up economic and legal reforms that would help the economy grow. He outlined six initiatives that would streamline investment, provide food security, upgrade oil and gas infrastructure as well as support the country’s airline and ports.
The 2018 budget will provide funding for those priorities. Almost half of the spending will be directed toward completion of projects in healthcare, education, transportation and others toward hosting the 2022 World Cup.
The embargo briefly disrupted imports and squeezed banks as foreign deposits dropped, prompting authorities to inject money into the banking system. The isolation has exacerbated a broader slowdown due to lower global energy prices, which cut Qatar’s growth estimates to the slowest pace since 1995. Gross domestic product is expected to grow between 2.5 percent and 3 percent in 2018, the finance minister said last week.
©2017 Bloomberg L.P.