The economic impact of the dropping oil prices on the economy of Qatar: A Research Proposal

Background

Qatar is a nation that thrives on the oil economy and dropping of the oil prices would have a great impact on its economy. However much Qatar have tried to invest in other areas such as real estate, oil remains to be the backbone of its economy. Most business people in Qatar in other sectors mainly depend on the oil economy for their businesses to flourish. Most economists expect that any fluctuation in the oil prices would have a huge impact on Qatari economy (Kharseh, 2013). The key economic areas that will be affected include government finances, infrastructure development, poverty alleviation, employment, and debt servicing. Husain et al. (2015) argue that despite the fact that lower oil prices translate into higher expenditure among non-OPEC countries, the rate at which oil prices are declining may adversely affect the vulnerabilities that are already in existence in OPEC countries particularly Qatar and Saudi Arabia. The fluctuations in the oil prices is causing panic among the Qatari people as their economy can deteriorate.

There have been wide fluctuations in oil prices which have played a vital role in driving various economies especially the economies that are dependent on oil into recession. Between 2008 and 2015, there has been fluctuations in the oil prices that this has impacted the Qatari economy in different ways. All the sectors in the economy are affected since oil their main source of income. The fluctuations in oil prices have also led to regimes collapsing, and this is why movement in oil prices are being watched closely by policymakers, economists, and investors globally. Since 2008, the prices of oil have been to two cycles of high and lows, and there is no indication of a steady path even in the near future. The instability in the oil prices are affecting the economies that are highly dependent on oil such as Qatar.

Furthermore, the falling in oil prices implies that oil revenues will also fall which will impact the public spending on social services negatively. Social services that may be affected include poverty alleviation and creation of employment in countries that export petroleum products (Piet, 2012). This year, the Qatari government has already posted a budget deficit due to the falling prices of oil below $60 barrel (Parasie, 2015). Qatar heavily depends on oil and 90% of its revenue comes from the energy sector. As noted by the World Bank, the falling in oil prices will negatively impact the economic activity, inflation rates, and employment. There is need by the countries that heavily depend on oil to make sure that the prices of oil do not fall since this will really affect the economy of these countries.

In most countries that export petroleum products, falling oil prices could translate to short-term recessions that are triggered by factor reallocation that is costly, uncertainty, aggregate investments in exploration and utilization that is lower than expected. The study aims at analyzing the economic impact of the dropping oil prices on the Qatari economy. The areas of interest in the study include infrastructure development, poverty alleviation, debt servicing, and employment and government finances.

Aim of the study

To analyze the economic impact of the dropping oil prices on the economy of Qatar.

Research Questions/Hypotheses

  1. What are some of the adverse consequences of falling prices of oil on employment, poverty alleviation, debt servicing, infrastructure development, and government finances?
  2. Do falling oil prices in Qatar spur the diversification of industries?
  3. Do Qatar’s economy over-rely on oil exports?

Research Objectives

General Objectives

To determine the economic impact of dropping oil prices on the Qatari economy.

Specific Objectives

  1. To identify some of the adverse consequences of falling oil prices in Qatar on employment, government finances, debt servicing, infrastructure development and poverty alleviation.
  2. To determine whether the falling oil prices in Qatar spur the diversification of industries.
  3. To discuss whether Qatari economy over-relies on oil exports.

Feasibility of the study

The analysis of the impact of falling oil prices in Qatar’s economy on five key areas of interest which include poverty alleviation, government finances, debt servicing, employment and infrastructure development is of paramount interest. It is because the Qatari economy is overly dependent on oil for growth since, without oil, the economy would go down. Various economists have argued that falling oil prices may spur the diversification of industries which further makes this study interesting. The researchers claim that in the recent years, Qatar has been developing an industrial sector that is thriving. This study may explain the overall resilience of the Qatari economy and whether it can adapt to any external shocks.

References

Husain, A., Arezki, R., Breuer, P., Haksar, V., Helbling, T., Medas, P., & Sommer, M. (2015). Global Implications of Lower Oil Prices. Staff Discussion Notes, 15(15), 1. http://dx.doi.org/10.5089/9781513532417.006

Kharseh, M. (2013). Economic viability of exploiting oil wells for electricity generation in Qatar: Performance and parametric investigation. Qatar Foundation Annual Research Forum Proceedings, (2013), p.EEP 064.

Parasie, N. (2015). Qatar Risks Budget Deficit in 2016 Due to Low Oil Prices, IMF Says. The Wall Street Journal, p.A1.

Piet, R. (2012). Social and economic impacts on the Gulf region in general and Qatar in particular of the expected energy independence of the western hemisphere. Qatar Foundation Annual Research Forum Proceedings, (2012), p.AHP44.

The World Bank. (2015). Understanding the Plunge in Oil Prices: Sources and Implications. Global Economic Prospects, January 2015.