Qatar slashes budgets by up to 30% as US-Iran conflict shrinks economy

Amid the ongoing US-Iran conflict and disruption to the Strait of Hormuz, Qatar has experienced a heavy economic crisis, prompting the government to cut its spending. Qatar's government departments have reportedly experienced budget reductions of up to 30 per cent, while funding for overseas aid has been reduced by about 85 per cent. The crisis came as the country's economy heavily depends on liquefied natural gas revenues.

Qatar's economy has been particularly hit due to the stoppage of its LNG production following damage linked to the conflict and difficulties shipping gas through the Strait of Hormuz, a critical channel for its energy exports. These setbacks come amid a steep economic downturn for the country. The IMF projects Qatar's economy will contract by 8.6 per cent this year, the sharpest decline among the six Gulf states.

Impact of Gulf economy

While Qatar holds significant financial reserves, including the roughly $500 billion managed by the Qatar Investment Authority, officials and economists caution that a prolonged disruption could strain government finances further and force additional spending cuts.

The broader Gulf economy has also felt the impact of the conflict, with energy exports, trade, tourism, and other sectors all disrupted. Qatar and Kuwait are especially vulnerable given how heavily they depend on the Strait of Hormuz for shipping energy.

Despite the economic pressures, however, Qatari authorities confirmed that the country remained capable of managing the crisis and maintaining its long-term economic strategy, citing its experience in dealing with previous regional and global crises.