Iran war deepens Qatar’s lending slowdown after World Cup

• Public borrowing down $5bn
• IMF predicts 8.6% GDP drop
• Repo borrowing nearly triples

Public borrowing from Qatari banks has fallen by $5 billion since the Iran war began, while private-sector credit has barely grown as the conflict deepens an investment slowdown following the country’s hosting of the 2022 football World Cup.

Domestic public-sector credit dropped 4.5 percent to QAR391 billion ($107 billion) from February 28 to the end of June, its lowest level since December 2025, central bank data shows.

Private-sector credit expanded just 0.2 percent to QAR973 billion over the same period. Overall credit, including Qatari bank lending abroad, grew by 1 percent to QAR1.5 trillion.

“Given there’s little economic activity, the allocation of capital has diminished massively,” said Farouk Soussa, a Mena economist at Goldman Sachs in London.

Soussa said the lower lending is consistent with concerns, domestic and external, over Qatar’s near-term economic prospects and a commensurate rise in credit risk. This is reflected in pricing and reduced external lending to the banking system and outflow of capital, he said.

Credit growth has been lacklustre since Qatar hosted the World Cup four years ago, with the Iran war exacerbating this trend.

“This is an economy that has overcapacity, so its investment requirements are pretty minimal and largely elective,” Soussa said. “Due to the war, there’s less non-energy economic activity, which is reflected in weaker credit growth.”

GDP pain

Qatar’s real GDP will shrink 8.6 percent in 2026, the International Monetary Fund forecasts, following Iranian strikes on Qatar’s liquefied natural gas (LNG) production facilities and Tehran’s near-complete blockade of the Strait of Hormuz, through which Qatari seaborne exports usually transit.

“Inbound investment is declining, with foreign investors reducing their exposure to the country,” said Azad Zangana, head of GCC macroeconomics at Oxford Economics in Dubai.

“It’s not game-changing, but it shows the direction of travel if Qatar’s energy exports remain restricted,” Zangana said.

Near-flat private-sector borrowing masks significant industry variances. Industrial and real estate lending fell, while services and trade have risen. This shows “a demand pause concentrated in the corporate segments the war hit directly, with the household and services economy still ticking over”, said MR Raghu, CEO of Kuwait’s Marmore Mena Intelligence.

S&P Global Ratings has a stable outlook on Qatari banks, thanks to the sector’s “solid capitalisation and profitability”, associate director Juili Pargaonkar said.

The average Tier 1 ratio, a measure of the financial sector’s resilience, for the top eight banks was 19.5 percent as of June 30, comfortably above the 10.5 percent minimum requirement, according to S&P. The ratings agency describes lenders’ asset quality as “broadly stable… with no immediate signs of stress” arising from the Iran war.

The top eight banks’ average nonperforming loan (NPL) ratio, a measure of the quality of lending, was 3.7 percent on June 30, according to S&P, which predicts this will rise to “just above” 4 percent in 2026-27.

“We expect credit buffers to gradually erode towards year-end,” Pargaonkar said.

NPL levels have remained low because individual borrowers’ monthly repayments are deducted directly from their salaries and government and quasi-government entities are the biggest corporate borrowers.

“So, what is manifesting are liquidity pressures rather than solvency pressures,” Soussa said.

Banks’ required reserves at the central bank fell by more than one-sixth, to QAR43.4 billion, after the central bank in March cut the reserve requirement on deposits from 4.5 percent to 3.5 percent to boost sector liquidity.

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Lenders’ repo borrowing – short-term central bank loans secured against securities the banks hold – nearly tripled to QAR12.8 billion.

Raghu said the fall in required reserves and increase in repo borrowing reflected the central bank’s policy response rather than deteriorating bank fundamentals.

“The key [banking sector] figures moved because of a policy decision, not a market outcome,” Raghu said.

“Credit growth is likely to remain flat or see a mild uptick because the constraint is export-related cash flows rather than credit supply.”