As strongly-worded ultimatums are re-issued, and compliance deadlines pass, the diplomatic crisis in the Gulf grinds on with no obvious end in sight. And the real world actions that Saudi Arabia, the UAE, Egypt and Bahrain have so far taken against Qatar mean the financial impacts have now moved beyond the hypothetical.
Qatari news agencies have quoted various far-flung readers from across the globe who are nervously reporting that they have struggled to exchange their hard-earned riyals on overseas trips. Any negative impact on the free flow of remittances will naturally raise concerns among the hundreds of thousands of ex-patriots who make up the vast majority of the Qatari workforce – not to mention 90% of its population. Authorities in Doha are actively seeking to persuade investors and customers that there has been a “limited” and “manageable” effect on local banks, and that they will guarantee all riyal-related foreign exchange transactions.
In a small nation like Qatar, where life quite literally relies on imports, consumers will quickly feel the pinch from even the slightest slide in their currency. Obviously with the world’s highest GDP per capita, Qatar is hardly likely to be grappling with food shortages any time soon. But after S&P’s decision to downgrade Qatar’s rating and Fitch’s announcement that the country was now on negative watch, authorities in Doha may see their cost of borrowing rise.