Qatar’s baseline macroeconomic outlook remains positive as the GDP growth will hover around 6% in 2014 with public investments keeping growth at around 6–7% over the medium term, the IMF said in an article IV report. GDP growth was 6.5% in 2013, driven by strong expansion in the non-hydrocarbon sector, the IMF said. The negative spillovers from sluggish global growth and financial market volatility have been limited while fiscal and external sectors continue to record large surpluses thanks to high hydrocarbon prices.

Qatar’s CPI inflation will stay benign at 3 to 4% going forward, amid the anticipated decline in commodity prices, including for food, and the fixed exchange rate, the IMF noted.

Potential challenges to Qatar’s outlook include the risk of over-heating in the near term and over-capacity in the medium term as a result of the public investment program. The possibility of a sharp decline in oil and gas prices remains the main medium-term risk though. But the government has ample fiscal and external buffers to deal with contingencies, the IMF underscored.

Qatar’s macroeconomic policy framework is being bolstered by several ambitious reforms in the area of fiscal policy and institutions, financial regulation, macroprudential policies, liquidity management, and development of the local debt market, according to the IMF.

The fund underscored that Qatar has been saving the large fiscal surpluses, and has started introducing a medium-term focus into the budget process.

The government is also supporting economic diversification through measures to further financial deepening and private sector development, the IMF noted.

The IMF stressed the importance of a well-drafted implementation of the large public investment program, and called on authorities to remain vigilant about possible inflationary pressures.

If signs of overheating arise, action should be taken to soften capital spending, and deploy liquidity withdrawal operations and further macroprudential measures in case of excessive credit growth or risk-taking, the IMF recommended.

The IMF also noted the government’s efforts to reduce price pressures by addressing bottlenecks in the supply chain.

The IMF, likewise, noted the government’s efforts to boost economic diversification by supporting financial deepening and private sector development.