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Sunday, October 26, 2008

Can Qatar ride out the recession?

Both the economy and the people may be as gloomy as the weather back in the UK, but so far the looming global recession does not seem to be affecting Qatar.

The average person seem to ploughing on with their usual life and concerns, and the state of the world's economy, while meriting the odd depressed comment, does not yet dominate conversations.

Many feel that Qatar, and indeed the Middle East, is a safe spot, and that the region's oil and gas reserves will insulate it from any crisis.

Indeed Brits can now finally enjoy more favourable exchange rates - the pound dropped below six riyals last week for the first time in several years.

More foreigners may also be seeking work in Qatar. Experts have been predicting that jobs seekers from the West will be forced by the miserable job market back home to seek work in the Middle East, and indeed a jump in the number of CVs being uploaded via our website seems to suggest that this is indeed the case.

Our optimism may not be justified. Many of the massive projects underway in Qatar have been financed with money from abroad, and finance worldwide is drying up. These projects may now be heading into trouble.

The government certainly has plenty of cash, but whether this will be enough, or whether they will be willing to use it to provide a net for the reckless business owners who have ridden the bubble till it popped, remains to be seen.

The price of oil is likely to fall. Initial cuts in production do seem to have stemmed the fall, but by doing so the oil cartels may be preventing one of the mechanisms which will help the industries of the West to recover. As the Middle East have huge investments in the West, this will hurt them as well. Of course, they could take advantage of the current situation to snap up assets at bargain prices, so a temporary fall in share values might not bother them hugely.

However, ambitous private projects aside, Qatar does have a serious advantage. Its huge natural gas reserves are only just beginning to be utilized, and with the formation of a cartel with other major suppliers Russia and Iran it may be able to enjoy stable prices even within the context of a global recession.

Ultimately, I don't know how well Qatar is going to weather the current financial crisis. Nevertheless, it still seems a better bet than debt ridden Britain and our spendthrift Prime Minister, Gordon Brown.

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