Reuters logo
TEXT-S&P affirms Qatar's sovereign credit ratings
July 25, 2012 / 3:07 PM / 5 years ago

TEXT-S&P affirms Qatar's sovereign credit ratings

 (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)
 

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below