Well, thank you and thanks to all of you for being here. And, Mr. Minister, I wonder if I could begin with you. First, we heard about the hard choices the Qataris had to make here in recent months. And I look at the data, the IMF cutting its growth forecast by 14.7 percentage points, the widest budget shortfall we've seen on a quarterly basis in many years. How do you begin to quantify the costs of this conflict and what it will take to rebuild from it?
Ali bin Ahmed Al Kuwari
0:27 ↗
Thank you very much. First of all, I thank you an awful lot for inviting me and for being here and also honored to hear that economic forum, New York, or the UNGA chapter. You know, it's really, I mean, as you know, His Excellency the Prime Minister was explaining earlier, it's been a very difficult situation. The war started in February. We lost so much of our revenues due to the stoppage of exports of oil and gas, which represent almost 70% of our revenues. So, that has been a very difficult situation for us. And this was reflected in the results we announced, our budget results for the first six months. We had a deficit of $36 billion, which was one of the highest we had in a very long time. Also, the GDP contracted by 7% in the first quarter, mainly because of the oil and gas -25%, and oil and gas despite, you know, we had an excellent performance and then an oil play going up by 3.5%. So it has not been an easy situation.
However, what we have done in the past really is paying off today. We have built a discipline and our fiscal policies. This is the fiscal policy framework we built where we decide, we took a long view in the budget in terms of different scenarios, stress scenarios for revenues as well as expenditure. And then we decide how to deal with the surpluses, how much of it cost to settle that? How much it cost to build what we call quality assets to a sustainability fund at the Ministry of Finance level. Also, how much of the reserves of the central bank and how much goes to pay to invest for the future generation. And that policy really helped us to navigate or to weather the storm, the situation since now. So we've been using our fiscal buffers to manage the budget. We have done some fiscal tightening, but mainly in the operational side we had some efficiency opportunity to take and which we took, basically. And that's why our second quarter expenditure is 25% less than last year. Same time. So we have done this, the fiscal buffer is helping us. And even during the war since our time, we were able to settle $5.5 billion of that. We took $3 million. That from my friend Daniel. Thank you very much. This was a private placement from the. And so even an hour that we able to reduce the debt during this time. And going forward we have other tools that we can't get into. So more fiscal tightening opportunities, we can do, we have a chance also to diversify our revenue streams. About taxation, VAT already implemented the global tax review. So and again, still there are some tools what to tap into. But even having to create will be replenished once the situation is restored. So going forward we should give a position. And as far as the, you mentioned that the expectations is a -14.5, 14.7%, you know, contraction. And the economy will go down, but this is going to be a V-shaped recovery. So next year, well, whatever we lose and until of like, GDP decline is going to be compensated next year. And thereafter Qatar is going to be the highest or the fastest growing economy in the region for the following 50 years. Fastest growing.
Let me take the segue that the minister has offered. Manny, I'll turn to you. We hear about the deep reserves, the fiscal discipline, access to capital in a moment like this is so crucial. And I wonder if you could talk a bit about the way that you've approached.
I think the market is wide open. And I think the parity is that the Gulf and in particular, Qatar, is a great neighborhood to lend money. And we took the opportunity when the conflict started. We have a very big global and emerging market business, which is quite successful, and we saw that as a great opportunity to partner and be there when Qatar needed us and showed that we can be supportive when things are more challenging. But things are great. Everyone is your friend. But we took this opportunity and I think it's good for our investors. And, you know, I think very good for Qatar. And we're very happy to have been on this partnership. And thanks for joining.
Let me get your perspective on this as well. You just got back from the region, and I'm very eager to hear your perspective on the resilience that we've seen really, since this conflict began.
Yeah, I think you can divide the world between those that are protecting what they have and those that have been building what they need. And part of that building, what it needs is the resiliency, both fiscal discipline, energy security and supply, and obviously the focus on technology, productivity. And many of the different countries in the region, Qatar obviously being a shining star and that is benefiting from that investment and from the vision that has driven the country over the last few last decades, frankly. I mean, and you see that coming into force. So it's a painful moment for sure, but it's temporary. And as we look further forward, you can see the vision adapting to more logistics, security now being a theme that's there. And continuing to build different forms of more physical security then we envisaged a few years ago.
On that note, Minister, and we can look into this today with the announcement of this investment platform. I think when the conflict began, there was speculation that there'd be less external investment and a lot more domestic investment. How do you think about the balance of those two things as you move toward what you hope to be, that V-shaped recovery?
Ali bin Ahmed Al Kuwari
6:25 ↗
I mean, QIA is, I mean, they have the mandate. I mean, actually, they have two mandates, basically the investment for the future generation, to be part of our fiscal sustainability in the long term. You know, so to be able to diversify the revenues for the country. Plus, they have a mandate for the national economy and to invest in Qatar and to invest and to create national champions. So now, as QIA grow, very, very, very big numbers. Makes sense to differentiate. The mandates, I mean, I still is the owner of the ISO is part of the QIA. But you have delegated the national agenda to basically to manage the local portfolio. Then there is a focus, there is an attention to the national economy. We have the National Development Strategy three, which is expiring in 2030. Now someone has to focus on these agendas, startups, new sectors, creating new champions, securitization and privatization of many of these companies. So the platform will be mandated, that will continue to focus on the international investments and the diversification and the growing sectors and looking to different regions. So their strategy does not change. They will continue to invest. They will continue to place funds internationally, all that. QIA will be focusing on the local economy. And this really makes a huge sense. Especially when you have a situation for Qatar where you have a very ambitious diversification strategy.
I was struck by some new ones from the Prime Minister this morning talking about a circumstantial disruption versus a structural disruption. And I'm thinking about the ramifications of the energy shock that we've seen, how that continues to ripple out around the world. And I'm curious how you're thinking about the next stage of that. As we see diesel prices going up, refined products very much in focus here. How are you thinking about the ramifications of that globally as we kind of pull back from Qatar and the Middle East more broadly?
I also think the Prime Minister said it well. It's a misnomer to call this a regional conflict. This is something that's impacting the whole world. And it's not just what's happening in the Middle East. We've also seen Ukraine taking down a lot of the Russian capacity as well. That's having an impact on markets saying we can anticipate a more bumpy road ahead for sure. Because of the impact on inflation. But we're at a point where in the great AI revolution that's going on and investments, in many ways the bottleneck has moved from chips into energy. And we're seeing enormous demand for energy around the world. I mean, and real demand behind the compute. It's not wishful thinking. We can see that it's real, and it's for several years ahead. So the confluence of these two factors is going to be pretty significant on the economy. And I think as we're all saying this, the economy is resilient. We're seeing tremendous opportunities around the world that will be driving growth. But there are these material tail risks. And I think the next few months are going to be bumpier than most people think.
Let's linger on artificial intelligence and AI for a moment here in many. Pimco has got involved in deals in Michigan with Oracle, Louisiana with Meta. These are sizable deals in which you're involved. How should we think about that in the way that you're weighing the risk when it comes to AI?
Well, I think it's a pretty unique situation. I think the need in terms of capital and in terms of borrowing are like nothing we have ever seen in our career. But also the opportunity is incredible and it's going to take many different shapes. It's going to be funding data centers and we hope will be in a situation to do things in the Gulf and things in Qatar. It could be lending money against some of the hyperscalers. It could be lending money against chips. It can be more complicated structure where we lend money against compute. It's a whole new world. What we really need to think about is the gain in productivity, and the fact that the cycle in CapEx is going to be long and it's going to be beneficial to the world economy.
Mr. Minister, pick up on that, if you would, as you look to diversify your economy more. Talk about the role that you see AI playing here in all of the ways I just described it.
AI is, I mean, is driving the growth in the world. You know, let's face it, this is the reality of what we see today. Most of the growth we see is really coming from AI and the investment in the AI applications and AI companies. And Qatar, you know, we have a national structure you have developed. We have a national AI champion, which is the QIA, you know, a company. And this is what, I mean, my friend Emmanuel was referring to me because we are working in a huge investment fund for data centers and AI applications. And this is some part of the shift or the opportunity we see from a crisis. What we see now, there is a, for example, in the AI business, it's an opportunity to export computational power rather than exporting oil and gas itself. So shifting this and this is, I think it's going to help to diversify and really change the way we do business. So it's really, I mean, very important. And it's just going to be at the heart of our strategies, going to be supporting startups coming to Qatar and going into early applications, we have certain advantages. And in certain applications, energy, for example, aviation is another example where Qatar has a strong national champion. So we see we can on the application side, on the downstream side we can do more in these areas. So this is something we'll look at. But also we have to be very careful. That goes both ways. I think the lack of regulation is an important thing. I think it's very important that we focus also in regulating AI before us, before it becomes too late than what they used to say. We will need that at stake. And I circulate, which is going to be too late. So it's very important that we heard about the cyber attacks. And then AI-enabled cyber attacks in London happened. And that's dangerous really. So we have to be careful. But again, from a business opportunity, we see a huge opportunity in shifting in the way we do business. Enabling AI and this is we can use that even at the government level for operating efficiencies and therefore saving costs, which is important for the Minister of Finance agenda. So this is something really, we are looking at and we are doing it at the government level saying there is technological change. This is moving very quickly. And normative change as well.
And I think over the course of the last week, ten days, we are wondering about the future of. I worried about it, including the executives of many of these companies. How do you translate that anxiety, that agitation to the market space, when you think about investment potential, the way in which markets have so closely hugged this new technology?
Okay, I can talk for Citi. We're in two races at the moment. One is on more of the offense, which is to apply to product development to our processes. Obviously a huge benefits in coding the speed. You can do things. And that's really exciting. What we're seeing there, particularly on the revenue generation side, because if you have growth, then that's also good for jobs. On the second side is the defense. I mean, I have to say, when Mythos came out, that was not a good day. When we saw the power of the model. So there is a race to defend and shore up all of the firm's perimeters, and there is a tsunami of patching going on in the world at the moment. In all companies, as we make sure that we are trying to secure the defense around the perimeter of our fire of arms against the negative side of the models. It's too early to know where all the puts and takes will come out, but you have to be running three races simultaneously.
To turn a little bit here. Manny, we have heard the Prime Minister of Canada talk about a rupture in the middle of the world order. Pimco has embraced the term as well. I saw that in your latest structural update, noting the fact that these changes are seismic. They're here to stay. And I'm curious about how that's changed your calculus, thinking about the way that alliances, the way that the world looks, the way the countries interact with one another, companies as well, is shaping your sense of investment here in 2026.
I think you can make a reasonable argument. Not a perfect one, but a reasonable argument that this is the time for new countries and the fact that Europe is being challenged. I think you have a cycle of elections in Europe, which will be really defining in terms of outcome and in terms of what may happen to the bond market. I don't have to tell you that 2027 will be very important in France, and those old country carries a very heavy level of debt. And the question always becomes, what's sustainable? You have a new government in the UK that has a set of initial conditions that are very difficult. You compare all the economy in Europe with what we can do in the Middle East and in some of the country in the Far East, and all of a sudden there are reason to be incredibly excited, both from a rate standpoint and a currency standpoint. And I think the cycle of competition is incredibly positive for Qatar, but it is not for the place we come from.
