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Discuss the impact of the fall of oil prices on GDP growth rate and fiscal policy in Qatar - Essay Example

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In countries using oil as a major source of production, their GDP halved. For the case of Qatar the situation is slightly different. This paper seeks to find out the effect…
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Discuss the impact of the fall of oil prices on GDP growth rate and fiscal policy in Qatar
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Download file to see previous pages However, the impact of the falling prices of oil on the GDP growth rate and fiscal policy of Qatar has been minimal due to the conservative budgeting system used in Qatar.
 The price of oil is one of the critical influencers of the GDP growth rate and Fiscal policy of in many of the oil rich Middle Eastern countries. In Qatar, oil currently accounts for up to 70% of the government revenues. The fall in oil prices in late 2014 was the most significant in the last thirty years. Out of the last major drops in the last three decades, the fall in 1984 was the most similar to the one in 2014. Before the oil drop in 1980’s the 1970’s were coupled with major technological developments which shifted ever reliance on oil as a source of fuel. The drop in price was 61% within six months (Erbil, 2011, p. 12).
According to many experts, a fall in oil drop prices is caused by change in demand and supply of the commodity, changes in OPEC objectives, geopolitical concerns in oil producing areas and appreciation in the US dollar. On the other hand, the growth of non oil sector was experienced by 6.3% and is expected to grow to about 7% this year (Berument, 2014, p. 149). The fall in prices has caused contractionary fiscal policy measures. Fiscal break even prices go to a maximum of $184 and a minimum of $50 (Lopez-Murphy & Villafuerte, 2010, p. 20). This pressure has made Qatar to make changes in its fiscal policy.
In the last three decades oil prices have not remained constant but the drops in those years have not been as significant as the one in 2014. However there have been other five major drops since 1984 which led to a thirty per cent fall in oil prices. The fall in 2013 coincided with global economic recession, change in OPEC policy and an increase in oil supply. Major oil prices occurred between 1985 and 1986, 1990 and 2001, 1997 and ...Download file to see next pagesRead More
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