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Economic & Financial Impact Of Diplomatic Rift On Qatar Fading

The International Monetary Fund said the direct economic and financial impact of the diplomatic rift between Qatar and some countries in the region is fading.

Although economic activity was affected, this has been mostly transitory and new trade routes were quickly established, IMF staff said at the end of an official staff visit on Monday.

Overall growth for 2018 was projected at 2.6 percent. The implementation of the public investment program and the ease in the pace of fiscal consolidation would help support growth.

During 2019-23, growth was envisaged to average about 2.7 percent.

Inflation is expected to peak at 3.8 percent in 2018, before easing to 2.2 percent in the medium term.

While government's ability to support banks' balance sheets remains strong and banks are expanding the sources of financing, the ongoing diplomatic rift and expected further monetary policy normalization in the U.S., which directly affects Qatar via the peg of the riyal to the dollar, could somewhat dampen private sector credit growth, IMF said.

The lender said the peg to the U.S. dollar continues to serve Qatar well, providing a clear and credible monetary anchor.

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