CI affirms Qatar foreign, local currency ratings

Capital Intelligence (CI), a global credit rating agency, has affirmed Qatar’s long-term foreign currency and local currency ratings of ‘AA-’ and its short-term foreign and local currency ratings of ‘A1+’.
Qatar, whose ratings are supported by its substantial economic wealth, is the world’s third largest producer of natural gas after Russia and Iran, and is by far the largest exporter of liquefied natural gas (LNG).
According to the International Energy Association, the country has proven natural gas reserves of around 883tn cubic feet, with a reserve to production ratio of around 58 years.
Qatar’s prudent investment in large scale LNG projects has contributed to one of the highest levels of GDP (gross domestic product) per capita in the world, estimated at $64,447 in 2017.
Growth in real output is expected to average around 2.9% in 2017-19; and they are mainly focused on the impact and longevity of the geopolitical tension in the region. Real output growth had already slowed in 2016 to 2.2%, from 3.6% in 2015 due to a slower growth in the non-hydrocarbon sector, CI said.
The central government budget balance remained in deficit, reflecting lower LNG revenues, posting a deficit of 8.7% of GDP in financial year (FYE) 2016 and 3.2% of GDP in FYE2017 which ended in March 2017.
Based on the assumption that hydrocarbon prices are likely to pick up slightly in the short to intermediate term, CI expects the budget deficit to narrow to 0.6% of GDP in FYE 2018.
However, should hydrocarbon prices be lower than its expectations, this could lead to higher than projected deficits in the absence of substantial fiscal consolidation measures.
Nonetheless, gross government debt remains moderate, albeit now on the rise, at an estimated 50% of GDP in 2017. Factoring that the debt of government-related entities (GREs), overall public debt could account for about 85% of GDP, which is deemed as relatively high compared to other similarly rated sovereigns.
The Qatari government remains a comfortable net external creditor, however, and sizeable foreign assets provide the country with the capacity to absorb mild external shocks and mitigate concentration risks arising from the dependence on hydrocarbons.
Although deemed strong, the government’s external assets position including the assets of the Qatar Investment Authority are expected to come under pressure, as future withdrawals to finance the budget gap or support the banking system and GREs should not be ruled out in case of intensifying tension in the region, CI said.

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