Qatar Central Bank (QCB) has published the eleventh Financial Stability Review (FSR)-2019 on 16 August 2020.
FSR provides an analytical snapshot of the events that summarized the risks and vulnerabilities of the financial sector of Qatar during the entire span of 2019. It is a holistic review of the financial institutions as it consolidates the developments of Qatar Financial Centre (QFC). The review also provides the strategies adopted by the regulatory authorities in addressing the systemic risks and strengthening the internal capacity of the financial system based on both Qatar National Development Strategy 2017 – 2022 and Qatar National Vision 2030.
The review noted that there has been significant changes in the global economy. The increased macroeconomic stress from tighter financial conditions, geopolitical tensions and escalated trade barriers weighed on the global economic growth in 2019. The global growth was at its lowest since the financial crisis during the year. The slowdown of economic growth was evident both in advanced and emerging market economies. Downward pressure on the oil prices added further worry for the oil exporting countries. Uncertainties from the trade disputes and stress from geopolitical tensions posed challenges to the financial markets across the globe.
The global economic uncertainties and volatile energy markets lead to contraction in the economic activity in Qatar during 2019. At the same time, the current account and fiscal account remained surplus, which provided the necessary impetus to continue infrastructural related activities. The institutionalization of Investment promotion agency and the new Foreign Direct Investment (FDI) law allowing 100% foreign direct investment enhanced the role of the private sector. Reflecting the rising productivity and efficiency, the ranking of Qatar in the global competitiveness index improved further.
The banking sector, the mainstay of the financial sector remained safe, sound and solid. Liquidity conditions in the banking system have improved with the normalization of capital flows and the consequent accumulation of net foreign assets by QCB. The low delinquent loans and higher cushion of capital facilitated sustainable expansion of its balance sheet. The adoption of regulatory standards in par with best international standards improved the shock absorbing capacity and ensured financial resiliency in the sector.
The financial sector continued to record growth driven by insurance sector, Exchange Houses and QDB. High capitalization and comfortable liquidity among these segments underscored latent capacity for future expansion and sufficient resilience towards stressful situations. Financing companies and Investment companies continued to enhance their capital and liquid assets during the year. Assets of Exchange Houses also recorded significant growth during the year. Net liquid assets with them improved further during the year.
The analytical review revealed that Qatar financial sector continued to remain sound and its ability to maintain financial stability appeared to have strengthened in 2019.