Qatar 'AA-/A-1+' Ratings Affirmed; Outlook Stable

  • In view of the sharp fall in international oil prices, we have significantly lowered our oil price assumptions for 2020 and 2021.
  • Nevertheless, Qatar's government and external balance sheets currently remain strong and provide a buffer to withstand external shocks.
  • We are affirming our 'AA-/A-1+' foreign and local currency ratings on Qatar.
  • The outlook is stable.

Rating Action

On March 26, 2020, S&P Global Ratings affirmed its long- and short-term foreign and local currency sovereign credit ratings on Qatar at 'AA-/A-1+'. The outlook on the long-term rating is stable.
As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 "EU CRA Regulation"), the ratings on Qatar are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar (see "Calendar Of 2020 EMEA Sovereign, Regional, And Local Government Rating Publication Dates," published Dec. 20, 2019, on RatingsDirect). Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the reason for the deviation is S&P Global Ratings' revision of its hydrocarbon price assumptions for 2020 and 2021. The next scheduled rating publication on the sovereign rating on Qatar will be on May 8, 2020.


The stable outlook indicates our view of broadly balanced risks to the ratings. While hydrocarbon prices could remain low, we don't expect the government's fiscal and external positions will materially deteriorate beyond our current expectations. Despite our view of continued institutional weakness, we expect a timely policy response from the government in the context of soft economic growth and continued stress in the international capital markets.
Downside scenario
We could lower the ratings if Qatar's public finances or external position materially weakened compared with our forecasts. This could happen, for example, as a result of a decline in hydrocarbon revenue beyond our assumptions without a sufficient fiscal policy response. Such a weakening could also entail significant capital outflows and larger or more prolonged current account deficits than we currently anticipate, which might reduce Qatar's external buffers to absorb additional shocks.
Upside scenario
We could consider raising the ratings if Qatar's political institutions were to develop in line with those of its peers outside the region, and we observed a marked increase in transparency, including greater clarity on the Qatari government's external assets.


S&P Global Ratings materially lowered its oil price assumptions for 2020 on March 19, 2020. This follows an earlier significant downward revision of its price assumptions on March 9, 2020. Prices for crude oil in spot and futures markets are more than 55% lower than levels observed during the summer of 2019 when prices increased on the back of rising geopolitical tensions. When we last reviewed Qatar ("Summary: Qatar," published Nov. 8, 2019, on RatingsDirect), we expected Brent oil prices to average $60 per barrel (/bbl) in 2020 and to gradually decline to $55/bbl in 2021 and beyond. We now assume an average Brent oil price of $30/bbl in 2020 and $50/bbl in 2021, and $55/bbl from 2022 (see "S&P Global Ratings Cuts WTI And Brent Crude Oil Price Assumptions Amid Continued Near-Term Pressure," published March 19, 2020).
Oil prices plummeted following OPEC's failure to agree on further production cuts during meetings on March 6. OPEC+ did not agree to a proposed reduction of 1.5 million barrels per day (mmbbl/d) to address an expected significant drop in global demand partly due to the spread of the coronavirus. The proposed reduction was in addition to the current 2.1 mmbbl/d production decrease set to expire at the end of March. Shortly after the meetings, Saudi Arabia announced that it was immediately slashing its official selling price and would increase its production to over 12 mmbbl/d in April after the current production cut expires. These actions possibly signal that, despite a collapse in global demand and shrinking physical markets, Russia and OPEC have engaged in a price war to try and maintain market share and market relevance. Oil markets are now heading into a period of a severe supply-demand imbalance in second-quarter 2020. In line with our economic outlook (see "Economic Research: COVID-19 Macroeconomic Update: The Global Recession Is Here And Now," published March 17, 2020), we anticipate a recovery in both GDP and oil demand through the second half of 2020 and into 2021 as the most severe impacts from the coronavirus outbreak moderate.
Qatar derives about 50% of its GDP, 80% of government revenue, and more than 85% of exports from the hydrocarbon sector. This makes the country's undiversified economy and credit profile vulnerable to a steep and sustained decline in the oil price, to which most of Qatar's long-term gas contracts are linked. Our expectation of lower oil prices will weigh on the country's economic outlook and we project average growth at about 1.5% over the forecast horizon through 2023. Downside risks to growth in the short term are subject to reduced activity due to the COVID-19 pandemic, which could exert significant pressure on the economy, specifically the real estate, trade, retail, and hospitality sectors.
Nevertheless, we expect the deterioration in Qatar's credit profile to be contained. The ratings are supported by the very strong external and fiscal positions, which are underpinned by relatively low central-government debt and the large external assets Qatar has built up over several years. In view of oil price assumptions, we forecast that the general government balance will record a deficit of 2% of GDP in 2020 compared with a 6.6% surplus in the previous year and revert to about 4.5% surplus by 2023.
Mirroring developments on the fiscal side, Qatar's external accounts will run a deficit through 2021, before reverting to about 4.2% surplus in the remainder of the forecast period. We now project liquid external assets will exceed external debt by 93% of current account payments (CAPs) over the forecast horizon, which compares with 136% in our last publication. Qatari banks' nonresident liabilities continue to rise, which worsens the country's external liquidity position. We estimate the share of external funding maturing within 12 months is about two-thirds of the total. Despite increased external financing needs, we still regard Qatar's overall external position to be a key strength, underpinned by our estimate of its large liquid financial assets, equivalent to more than 100% of GDP. This provides the government with an exceptional buffer during financial shocks. We believe that the authorities are likely to provide extraordinary liquidity support to the banking system, in case of sudden reversals in foreign flows. The government's timely intervention during the ongoing boycott that started in 2017, to curb the pressure emanating from external funds outflows, supports our view. However, data transparency remains limited; the government neither discloses nor reports the level of its fiscal and external assets.
We anticipate that, despite the ongoing boycott, political and social stability will continue, although decision-making is opaque and centralized. The government is bringing in structural reforms to diversify Qatar's economy and reduce its dependence on hydrocarbons. The reform agenda pertains to the overall business environment, labor law, real estate market liberalization, increased foreign ownership limits, and public-private partnership initiatives. In our view, despite the long implementation horizon, these reforms could gradually increase Qatar's long-term growth potential.

Key Statistics

Table 1

Qatar Selected Indicators
(Mil. QAR)2014201520162017201820192020202120222023
Economic indicators (%)
Nominal GDP (bil. LC)751589552608697715609728799829
Nominal GDP (bil. $)206162152167191196167200219228
GDP per capita (000s $)92.366.758.463.271.672.060.270.575.877.1
Real GDP growth4.
Real GDP per capita growth(4.9)(4.4)(4.7)(0.1)0.3(0.3)(1.0)(0.7)(0.3)(0.2)
Real investment growth11.31.622.
Real exports growth0.4(1.4)(3.9)0.7(0.5)
Unemployment rate0.
External indicators (%)
Current account balance/GDP24.08.5(5.5)
Current account balance/CARs33.313.7(10.3)6.814.97.9(12.4)(7.9)7.810.1
Trade balance/GDP46.330.216.722.026.622.614.114.619.219.9
Net FDI/GDP(2.8)(1.8)(4.7)(0.4)(3.0)(1.5)(1.5)(1.0)(1.0)(1.0)
Net portfolio equity inflow/GDP(6.7)(6.5)(4.5)8.1(6.3)(8.3)(3.7)(3.5)(4.2)(4)
Gross external financing needs/CARs plus usable reserves82.7106.0144.5156.7175.1186.6235.3251.1235.0229.9
Narrow net external debt/CARs(125.6)(153.9)(151.6)(102.3)(90.6)(96.5)(117.6)(95.5)(83.6)(80.2)
Narrow net external debt/CAPs(188.3)(178.3)(137.4)(109.7)(106.5)(104.7)(104.6)(88.5)(90.7)(89.2)
Net external liabilities/CARs(166.9)(227.2)(252.6)(192.3)(167.3)(186.0)(249.8)(212.5)(183.8)(186.0)
Net external liabilities/CAPs(250.3)(263.1)(229.0)(206.2)(196.7)(202.0)(222.2)(196.9)(199.5)(206.8)
Short-term external debt by remaining maturity/CARs32.849.477.391.286.6108.0185.4173.6155.4156.7
Usable reserves/CAPs (months)
Usable reserves (mil. $)28,32023,89016,782(2,231)7,59419,84810,4295,4587,7658,502
Fiscal indicators (general government; %)
Change in net debt/GDP(20.1)
Primary balance/GDP17.1(4.3)(1.6)(0.2)9.08.2(0.2)
Net debt/GDP(96.1)(113.0)(120.5)(93.1)(84.6)(99.8)(114.9)(99.7)(95.4)(96.3)
Liquid assets/GDP119.7147.6165.2142.0133.7147.6178.1155.9148.8150.1
Monetary indicators (%)
CPI growth3.
GDP deflator growth(0.2)(24.3)(8.1)8.313.00.9(15.6)
Exchange rate, year-end (LC/$)3.643.643.643.643.643.643.643.643.643.64
Banks' claims on resident non-gov't sector growth77.911.
Banks' claims on resident non-gov't sector/GDP69.599.2109.6106.1101.6105.9131.8115.8110.9112.1
Foreign currency share of claims by banks on residents13.917.619.319.722.
Foreign currency share of residents' bank deposits35.233.428.238.739.940.
Real effective exchange rate growth3.212.82.9(2.5)(2.9)1.0N/AN/AN/AN/A
Sources: Ministry of Development Planning and Statistics, and Qatar Central Bank (economic indicators); Qatar Central Bank, International Monetary Fund, Ministry of Finance, and Bank for International Settlements (external indicators); Ministry of Finance, Qatar Central Bank, and International Monetary Fund (fiscal indicators); International Monetary Fund, Bruegel, and Qatar Central Bank (monetary indicators).
Adjustments: Usable reserves adjusted by subtracting monetary base from reported international reserves. General government revenue adjusted by including investment income from sovereign wealth funds.
Definitions: Savings is defined as investment plus the current account surplus (deficit). Investment is defined as expenditure on capital goods, including plant, equipment, and housing, plus the change in inventories. Banks are other depository corporations other than the central bank, whose liabilities are included in the national definition of broad money. Gross external financing needs are defined as current account payments plus short-term external debt at the end of the prior year plus nonresident deposits at the end of the prior year plus long-term external debt maturing within the year. Narrow net external debt is defined as the stock of foreign and local currency public- and private- sector borrowings from nonresidents minus official reserves minus public-sector liquid assets held by nonresidents minus financial-sector loans to, deposits with, or investments in nonresident entities. A negative number indicates net external lending. N/A--Not applicable. LC--Local currency. CARs--Current account receipts. FDI--Foreign direct investment. CAPs--Current account payments. e--Estimate. f--Forecast. The data and ratios above result from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information.

Ratings Score Snapshot

Table 2

Qatar Ratings Score Snapshot
Key rating factorsScoreExplanation
Institutional assessment4Reduced predictability of future policy responses because of highly centralized nontransparent decision-making process. Political institutions in Qatar are still at a developing stage compared with peers' at a similar rating level. Executive power remains concentrated in the hands of the emir: the monarch, head of state, and commander-in-chief of the country's armed forces. Relatively weak transparency, with shortcomings in data dissemination in terms of availability and timeliness.
Economic assessment1Based on GDP per capita (US$) and growth trends as per Selected Indicators in Table 1.
External assessment4Based on narrow net external debt and gross external financing needs/(CAP + useable reserves) as per Selected Indicators in Table 1.
There is a risk of marked deterioration in the cost of or access to external financing due to a potential loss of non-resident deposits from the banking system, where those deposits are mainly lent onshore. Due to the less stable, confidence-sensitive nature of nonresident deposits, external funding could negatively affect Qatar's financial system.
The sovereign’s external data lack consistency. There are material data gaps between the balance of payments and the international investment position, stemming from the government's lack of disclosure on its external assets.
Fiscal assessment: flexibility and performance1Based on the change in net general government debt (% of GDP) as per Selected Indicators in Table 1.
The general government has large liquid financial assets (more than 25% of GDP) available to mitigate the effect of economic cycles on its fiscal performance.
The sovereign has a greater ability to reduce general government expenditure in the short term compared with governments in countries with a similar level of development. This was demonstrated by the government's decision to postpone some projects and rein in recurrent expenditure in response to lower oil prices.
The sovereign has a volatile revenue base, stemming from a high reliance on the hydrocarbons sector. Oil and gas revenue generally represents more than 75% of total revenue.
Fiscal assessment: debt burden1Based on net general government debt (% of GDP) and general government interest expenditures (% of general government revenues) as per Selected Indicators in Table 1.
Monetary assessment4The exchange rate is a conventional pegged arrangement with the U.S. dollar, which limits the sovereign's ability to have an independent monetary policy tailored to the needs of its domestic economy. Market-based monetary instruments, but effectiveness untested in downside scenario. Ability to act as a lender of last resort for the financial system. Annual CPI is less than 10%.
Indicative ratinga+As per Table 1 of "Sovereign Rating Methodology."
Notches of supplemental adjustments and flexibility1General Government is in a net asset position and has large liquid financial assets, equivalent to more than 100% of GDP. This provides the government with an exceptional buffer during periods of economic or financial shocks.
Final rating
Foreign currencyAA-
Notches of uplift0Default risks do not apply differently to foreign- and local-currency debt
Local currencyAA-
S&P Global Ratings' analysis of sovereign creditworthiness rests on its assessment and scoring of five key rating factors: (i) institutional assessment; (ii) economic assessment; (iii) external assessment; (iv) the average of fiscal flexibility and performance, and debt burden; and (v) monetary assessment. Each of the factors is assessed on a continuum spanning from 1 (strongest) to 6 (weakest). S&P Global Ratings' "Sovereign Rating Methodology," published on Dec. 18, 2017, details how we derive and combine the scores and then derive the sovereign foreign currency rating. In accordance with S&P Global Ratings' sovereign ratings methodology, a change in score does not in all cases lead to a change in the rating, nor is a change in the rating necessarily predicated on changes in one or more of the scores. In determining the final rating the committee can make use of the flexibility afforded by §15 and §§126-128 of the rating methodology.
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