(The following statement was released by the rating agency) Overview
-- We expect the Qatari government to remain in a strong net asset position, which in our view balances the concentration risk related to the economy's reliance on the oil and gas sector.
-- At the same time, we expect Qatar's narrow net external position to remain broadly in balance over our forecast period to 2015, despite the significant increase in banking sector external funding.
-- We are affirming our 'AA/A-1+' sovereign credit ratings on the State of Qatar.
-- The stable outlook balances our view of Qatar's high economic wealth and strong fiscal position against its institutional shortcomings, limited monetary flexibility, and its banks' increasing dependence on external financing. Rating Action On July 25, 2012, Standard & Poor's Ratings Services affirmed its long- and short-term foreign and local currency sovereign credit ratings on the State of Qatar at 'AA/A-1+'. The outlook is stable. The transfer & convertibility assessment is 'AA+'. The ratings affirmation and stable outlook apply to other ratings that depend on Qatar's sovereign credit rating, including the 'AA' long-term senior unsecured debt rating on the bonds issued by Qatari Diar Finance Q.S.C and by SoQ Sukuk A Q.S.C. Rationale The ratings on Qatar reflect Standard & Poor's view of Qatar's high levels of economic wealth and the country's strong fiscal and external balance sheets. The ratings are constrained by limited monetary flexibility and rising external risks alongside still-nascent public institutions and limited disclosure, particularly with respect to government assets and their returns. Qatar is one of the wealthiest economies we rate, with GDP per capita estimated at $98,000 in 2012. Relative to peers, real GDP per capita growth has been strong in recent years, but we anticipate a contraction from 2012 onward as the large investment program to boost liquid natural gas production capacity to approximately 77 million tons per year tails off. We project population growth to average around 6% per year until 2015 and as a result real GDP per capita is likely to decline modestly, by 1% on average over the period. Economic growth could accelerate again from 2015 when the government's moratorium on the development of new hydrocarbon projects is expected to end. At the same time, we view the banking system's increasing reliance on external funding, largely to meet demand for credit to fund public sector infrastructure projects, as increasing external risks. We note that the banking system's net external liabilities doubled during the first six months of 2012 to 18% of domestic loans. Nevertheless, we expect Qatar's net external asset position to continue to grow to over 100% of current account receipts, even as its external debt starts to exceed liquid external assets. The government is expected to continue to accumulate external assets with fiscal surpluses invested abroad through the Qatar Investment Authority. Qatar has accumulated considerable foreign assets over the past decade, the product of its high resource endowment, improving terms of trade, and long-term investment planning. We believe the general government net asset position will remain strong, at around 50% of GDP. The pace of future asset accumulation will depend on the evolution of hydrocarbon production and prices. In our view, these sizable assets balance the concentration risk of the Qatari economy, where oil and gas directly account for a substantial proportion of GDP (57% in 2011), exports (92%) and government revenues (81% in fiscal year 2011/2012). In our view, structural weaknesses and challenges remain. First, the country's public institutions are in the early stages of development compared with most 'AA' rated sovereigns. Second, given the fixed exchange rate with the U.S. dollar, we view monetary policy flexibility as limited. Third, data gaps are significant and transparency is limited, by international standards; in particular, the government neither discloses its fiscal assets nor reports earnings on these assets. Outlook The stable outlook balances our view of Qatar's high economic wealth levels and strong fiscal position against its institutional shortcomings, limited monetary flexibility, and its banks' increasing dependence on external financing. We could lower Qatar's ratings should sharp and sustained declines in oil prices or banking developments weaken the country's external or fiscal positions. The ratings could also come under pressure if political risks were to rise, particularly those related to succession. We do not expect to raise the ratings on Qatar over the next two years. However, we could do so if there were a faster-than-expected maturation of domestic institutions and if growth became less dependent on public sector investment. Related Criteria And Research
-- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
-- Criteria For Determining Transfer And Convertibility Assessments, May 19, 2009
-- State of Qatar's Proposed Sukuk Trust Certificates Assigned 'AA' Rating, July 9, 2012 Ratings List Ratings Affirmed Qatar (State of) Sovereign Credit Rating AA/Stable/A-1+ Transfer & Convertibility Assessment AA+ Senior Unsecured AA Qatari Diar Finance Q.S.C. Senior Unsecured* AA SoQ Sukuk A Q.S.C Senior Unsecured(4) AA 1. *Guaranteed by the State of Qatar 2. (4)Guaranteed by the State of Qatar, for more information see "State of Qatar's Proposed Sukuk Trust Certificates Assigned 'AA' Rating," published July 9, 2012 (Caryn Trokie, New York Ratings Unit)