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Satyendra Pathak
Doha
Moody’s Investors Service (Moody’s) on Tuesday said that Qatar would maintain its Aa3 rating with a stable outlook despite the depressed global oil demand due to coronavirus pandemic.
“The stable outlook reflects our assessment that Qatar’s credit metrics are likely to remain consistent with the Aa3 rating, even as oil prices remain subdued due to depressed global oil demand caused by the coronavirus pandemic,” the global rating agency said.
Qatar’s credit profile reflects the government’s strong balance sheet, vast hydrocarbon reserves and exceptionally high per capita income, it said.
“These factors provide significant shock-absorption capacity and mitigate the vulnerability of government revenue to temporary declines in oil prices, such as the one caused by the coronavirus pandemic, as well as the economic and financial risks arising from Qatar’s exposure to regional geopolitical tensions,” Moody’s said.
The stable outlook balances fiscal and economic risks stemming from the decline in oil prices with Qatar’s very large fiscal and foreign currency reserve buffers in the form of sovereign wealth fund assets, it said.
“The stable outlook also takes into account risks associated with the ongoing regional geopolitical tensions, including the diplomatic, economic and financial boycott by Saudi Arabia, the UAE, Bahrain, and Egypt,” Moody’s said.
Highlighting factors that could lead to an upgrade, Moody’s said, “A sustained and material reduction in external vulnerabilities through a decrease in external debt and a rebuilding of foreign-exchange reserves would likely prompt an upgrade of the rating.”
“Qatar’s score for economic strength is set at ‘a1,’ above the initial score of ‘a3,’ to reflect the country’s exceptionally high per capita income and very large hydrocarbon reserves,” it said.
In addition, Moody’s said, the relatively high historical volatility of real GDP growth that weighs on the initial score overstates the true risks to the Qatari economy as it predominantly reflects a slowdown to more sustainable growth rates after a period when Qatar’s real GDP grew 10-20 percent per year because of a rapid build-up of hydrocarbon production capacity.
A resource-driven economic boom since 2004, supported by rising commodity prices, has boosted Qatar’s per capita GDP at purchasing power parity to the highest level among the sovereigns we rate, to more than $130,000 in 2018.
Qatar is the world’s leading exporter of liquefied natural gas (LNG), accounting for one-third of global LNG exports. At the current rate of production, its proven natural gas reserves would last for an estimated 130 years.
Until recently, hydrocarbon production increases were limited by the self-imposed moratorium on the development of new natural gas projects in the North Field.
“However, the moratorium was lifted in April 2017, and based on the government’s stated plans, we expect Qatar to increase its LNG production capacity by 40-60 percent during 2023-27, with first output from the new LNG trains coming on stream in 2025. This will boost Qatar’s growth rate and nominal GDP in the medium term,” it said. “We score Qatar’s institutions and governance strength at ‘a2,’ taking into account the country’s strong institutional framework and effectiveness, counterbalanced by transparency shortcomings,” it said.
Qatar’s Worldwide Governance Indicators scores are in line with the Aa-rated median and stronger than those of other GCC countries, Moody’s said.
Doha
Moody’s Investors Service (Moody’s) on Tuesday said that Qatar would maintain its Aa3 rating with a stable outlook despite the depressed global oil demand due to coronavirus pandemic.
“The stable outlook reflects our assessment that Qatar’s credit metrics are likely to remain consistent with the Aa3 rating, even as oil prices remain subdued due to depressed global oil demand caused by the coronavirus pandemic,” the global rating agency said.
Qatar’s credit profile reflects the government’s strong balance sheet, vast hydrocarbon reserves and exceptionally high per capita income, it said.
“These factors provide significant shock-absorption capacity and mitigate the vulnerability of government revenue to temporary declines in oil prices, such as the one caused by the coronavirus pandemic, as well as the economic and financial risks arising from Qatar’s exposure to regional geopolitical tensions,” Moody’s said.
The stable outlook balances fiscal and economic risks stemming from the decline in oil prices with Qatar’s very large fiscal and foreign currency reserve buffers in the form of sovereign wealth fund assets, it said.
“The stable outlook also takes into account risks associated with the ongoing regional geopolitical tensions, including the diplomatic, economic and financial boycott by Saudi Arabia, the UAE, Bahrain, and Egypt,” Moody’s said.
Highlighting factors that could lead to an upgrade, Moody’s said, “A sustained and material reduction in external vulnerabilities through a decrease in external debt and a rebuilding of foreign-exchange reserves would likely prompt an upgrade of the rating.”
“Qatar’s score for economic strength is set at ‘a1,’ above the initial score of ‘a3,’ to reflect the country’s exceptionally high per capita income and very large hydrocarbon reserves,” it said.
In addition, Moody’s said, the relatively high historical volatility of real GDP growth that weighs on the initial score overstates the true risks to the Qatari economy as it predominantly reflects a slowdown to more sustainable growth rates after a period when Qatar’s real GDP grew 10-20 percent per year because of a rapid build-up of hydrocarbon production capacity.
A resource-driven economic boom since 2004, supported by rising commodity prices, has boosted Qatar’s per capita GDP at purchasing power parity to the highest level among the sovereigns we rate, to more than $130,000 in 2018.
Qatar is the world’s leading exporter of liquefied natural gas (LNG), accounting for one-third of global LNG exports. At the current rate of production, its proven natural gas reserves would last for an estimated 130 years.
Until recently, hydrocarbon production increases were limited by the self-imposed moratorium on the development of new natural gas projects in the North Field.
“However, the moratorium was lifted in April 2017, and based on the government’s stated plans, we expect Qatar to increase its LNG production capacity by 40-60 percent during 2023-27, with first output from the new LNG trains coming on stream in 2025. This will boost Qatar’s growth rate and nominal GDP in the medium term,” it said. “We score Qatar’s institutions and governance strength at ‘a2,’ taking into account the country’s strong institutional framework and effectiveness, counterbalanced by transparency shortcomings,” it said.
Qatar’s Worldwide Governance Indicators scores are in line with the Aa-rated median and stronger than those of other GCC countries, Moody’s said.
