Until recent decades, the Qatar peninsula was an undeveloped, impoverished area, with a scant living provided by the traditional occupations of pearl diving, fishing, and nomadic herding. In 1940, a major oil discovery was made at Dukhan and, in the ensuing decades, oil has been the dominant factor in the Qatari economy. Oil revenues have provided Qataris with per capita incomes comparable those of the industrialized nations of the West. In 1996, oil revenues accounted for more than 30% of GDP, 70% of export earnings, and 66% of government revenues.
Other economic activities remain limited. Agriculture has received considerable attention in recent years, but most food is still imported. The state encourages free enterprise, provided it does not conflict with the public interest. Real property, however, may be acquired only by Qatari nationals.The discovery of a vast field of natural gas unassociated with Qatar's oil fields promises to add a new dimension to the economy. In 1987, work on the first phase of the North Gas Field project Phase I, with a production capacity of 800 million cubic feet per day, began and was inaugurated in 1991. While Phase I production is meant for domestic consumption, the Phase II development envisages the production of at least an additional 800 million cubic feet per day for export to Japan as liquefied natural gas. The first shipments to Japan began in January 1997. The project was heavily financed by Japanese banks under terms that will limit Qatar's revenues for the next decade. Qatar has 300 trillion cubic feet of proven natural gas reserves; third in the world behind Russia and Iran. Production of natural gas reached 690 billion cubic feet in 1998.
The economy performed sluggishly during the first half of the 1990s but recovered somewhat in 1995 because of a surge in international oil prices and slightly higher rates of oil production. It is estimated that GDP grew by 1.9% in 1995. The government that took over after the coup of 1995 implemented economic reforms that updated the financial sector. In 1998, a temporary drop in international oil prices brought GDP down by 9.2%. However, the recovery of oil prices in the second half of 1999 brought a jump in GDP of 18.9% for the year, and 34.9% in 2000. Per capita income rose from $20,038 in 1998 to $24,000 in 2001. Inflation at 2.9% in 1998, dropped to 2.2% in 1999 and -1.0% in 2000.