DOHA: Global ratings agency Standard & Poor’s (S&P) has assigned ‘AA/Stable/A-1+’ sovereign credit ratings on Qatar. The ratings on Qatar reflect S&P’s view of is high levels of economic wealth and strong fiscal and external balance sheets with modest levels of debt and large external liquidity.
Qatar is one of the wealthiest economies we rate, with GDP per capita estimated at $104,000 in 2012. Relative to peers, real GDP per capita growth has been strong in recent years, but we have anticipated a contraction from 2012 onward as the large investment progamme to boost liquid natural gas production capacity to approximately 77m tons per year tails off, S&P noted.
“Qatar’s ratings is supported by its very wealthy economy, and strong external and fiscal balance sheets. We believe the ratings are constrained, along with those of the peer group”,it said.
S&P expects Qatar to maintain a comfortable budget surplus of about 6 percent of GDP on average between 2012 and 2015. This is lower than previous years: the surplus averaged about 10 percent of GDP over the five years to 2011 due to high hydrocarbon production and prices.
The government’s 2012-13 budget includes an increase in its conservative oil price assumption to $65 from $55 per barrel in the previous budget. “We expect the surplus target-QR24bn or 4 percent of GDP- to be overshot as in previous years; we forecast the surplus at double the government’s estimate”.
Qatari banks are profitable and well regulated. The banking sector is well capitalized, and has been even more so since the government, through Qatar Investment Authority (QIA), undertook three tranches of equity injections in domestic banks, beginning 2008.
The ratings agency view Qatar banking system’s increasing reliance on external funding, largely to meet demand for credit to fund public sector infrastructure projects, as increasing external risks. In 2012, S&P estimates that the banking system’s net external asset position to continue to grow over 100 percent of current account receipts (CARs). The government is expected to continue to accumulate external assets with fiscal surpluses invested abroad through QIA.
Qatar’s growth is expected to be increasingly driven by spending on $100bn-$150bn of infrastructure projects over 2015-16. The projects include finishing the New Doha International Airport, GCC and internal rail links, Doha Port, reservoirs and water treatment plants, industrial zones, and new stadiums and other facilities related to the 2022 FIFA World Cup.
Relative to peers, Qatar’s real GDP per capital growth has been strong in recent years. The ratings agency projects population growth to average around 6 percent per year until 2015 and as a result real GDP per capita is likely to be largely flat over 2012-2015. Economic growth could accelerate again from 2015 when the government’s moratorium on the development of new hydrocarbon projects is expected to end.
Qatar is believed to be in a strong net external creditor position, including FDI, estimated at 72 percent of CARs in 2012 and expected to increase toward 140 percent in 2015. At the same time, external liquidity is relatively good with gross external financing needs expected to average around 90 percent of CARs and usable reserves in 2012-2015.
S&P expects the trade surplus to remain strong in 2012 because of oil prices. Qatar’s non-merchandise outflows to remain large in the next three years. S&P also anticipate that profit repatriation by foreign companies will continue.
The Peninsula
