S&P affirms Qatar’s ratings at ‘AA-/A-1+’; outlook stable

Tribune News Network Doha S&P Global Ratings affirmed Qatar’s “AA-/A-1+” long- and short-term foreign and local currency ratings. The stable outlook of t...

Tribune News Network Doha S&P Global Ratings affirmed Qatar’s “AA-/A-1+” long- and short-term foreign and local currency ratings.The stable outlook of the country reflects “Qatar’s fiscal and external buffers should continue to benefit from the country’s status as one of the world’s largest exporters of liquefied natural gas (LNG) over the next two years, against a backdrop of high global energy demand,” the rating agency said.S&P said it considered the rapid growth of foreign debt in the Qatari banking system could present balance-of-payment risks if the capital inflows were to reverse sharply, but that it was not the agency’s base-case scenario.“In our view, Qatar’s status as one of the largest exporters of liquefied natural gas in the world and our estimate of its substantial fiscal and external buffers mitigate the risks,” the report said.S&P said it could consider raising the ratings if Qatar’s external and fiscal net asset positions proved stronger than forecast, while the banking system’s elevated stock of short-term external debt moderated in an orderly way.For its rationale, S&P said Qatar remains one of the largest exporters of liquid natural gas globally, with the government planning to increase production by about 64 percent to 126 million tonnes annually between 2025 and 2027, equivalent to around 3.1 million barrels of oil per day.Qatar’s macroeconomic indicators should then strengthen, the agency said, but growth assumptions for the near future factor in broadly stable gas production and a moderate expansion in manufacturing sector output, including heavy downstream activities.“Even so, Qatar’s income levels remain high, and we forecast that GDP per capita will rebound to an average of $68,000 in 2021-2024 from a low of $54,000 in 2020,” S&P said.The agency expects the country to run surpluses in its budgetary accounts at the general government level, with investment income from external assets offsetting moderate central government fiscal deficits. It said the country’s strong general government net asset position remains a credit strength.Averaging about 180 percent of GDP in 2021-2024, the government’s large liquid assets provide it with a strong buffer to mitigate the economic effects of external or financial shocks.Qatar derives about 50 percent of its GDP, 80 percent of government revenue, and 85 percent of exports from the hydrocarbon sector, noted the agency, adding that this makes the country’s concentrated economy and credit profile vulnerable to volatility in oil prices, to which most of its long-term gas contracts are linked.“We have revised our Brent oil price assumptions to $75 per barrel for the rest of 2021, $65 for 2022, and project $55 for 2023 and beyond. We project that the current account will return to a surplus of 10% of GDP this year, before moderating to about 2% of GDP on average over 2023-2024, in line with our oil price assumptions.” Nevertheless, the agency said, large assets accumulated within the Qatar Investment Authority will continue to support Qatar’s external position.“We forecast that Qatar’s overall external balance sheet will remain strong. We estimate that, on average, Qatar’s external liquid assets will surpass external debt by about 50 percent of current account payments in 2021-2024.”