Qatar stays at ‘AA-’; Outlook at ‘Stable’: S&P Global Ratings

American credit rating agency Standard and Poor’s remains positive about Qatar and has affirmed its ‘AA-/A-1+’ long and short-term foreign and local currency sovereign credit ratings on ‘S&P Global Ratings’ with a stable outlook.

The Report points out that, “The stable outlook indicates our view of broadly balanced risks to the ratings. Despite a sharp economic contraction and low hydrocarbon prices, we don’t expect the government’s fiscal and external stock positions will materially deteriorate beyond our expectations. We expect a timely policy response from the government in the context of continued liquidity challenges in the international capital markets.

Despite the steep drop in economic activity linked with the COVID-19 pandemic and Crude Oil prices, income levels in Qatar continue to be among the highest rates in the region, supporting its strong credit outline.

The report said “High GDP per capita, rebounding to an average of $66,500 in 2021-2023 from a low of $55,700 in 2020, will mitigate the effect of weak trend growth expected throughout the forecast horizon. We expect the rebound to be linked with an increase in hydrocarbon prices.”

“We project Qatar will continue to generate surpluses in its budgetary accounts on the general government level from 2021. The country’s strong general-government net asset position remains a credit strength. The government’s large liquid financial assets, averaging about 177 percent of GDP in 2021-2023, provide it with a strong buffer during economic and financial shocks,” the report added.

Despite current account deficits through 2021, the report observed that Qatar’s external balance sheet remains healthy, with liquid external assets continuing to compensate the country’s stock of external debt by a sizable margin.

“We expect the government will provide extraordinary liquidity support to the banking system, in case of sudden reversals in capital flows related to non-resident funding”
– S&P Credit Report on Qatar

Amid rising shocks from the COVID-19 pandemic and low oil prices, S&P said, “We now expect that Qatar’s growth will remain soft through 2023 as public spending will gradually taper off, weighing on economic activity in construction and associated sectors.”

“We expect economic growth will remain below the historical average, falling to about 1.3 percent through 2023. Gas output from the Barzan project will have only a marginal effect on growth in part because of insufficient domestic demand for its full capacity in the initial years as the project focuses on the domestic market,” the report said.

At an estimated 50 percent of GDP, about one-third of which is public-sector funded, Qatar’s investment spending remains among the highest of all the sovereigns we rate.
“The government is bringing in structural reforms to diversify Qatar’s Qatar’s economy and reduce its dependence on hydrocarbons. The reform agenda pertains to the overall business environment, labour law, real estate market liberalization, increased foreign ownership limits, and public-private partnerships. In our view, despite taking time to materialize, these reforms could gradually increase Qatar’s long-term growth potential,” the report added.