Doha: Global rating agency Fitch has affirmed Qatar's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook.
Qatar's 'AA-' ratings reflect a strong sovereign net foreign asset position, one of the world's highest ratios of GDP per capita and a flexible public finance structure allowing for favourable debt dynamics and a robust response to limit the fiscal impact of the coronavirus pandemic, the rating agency noted yesterday.
The Fitch Ratings estimates that Qatar's fiscal break-even oil price will average $48/bbl in 2019-2021, one of the lowest among Fitch-rated energy exporters. It noted that the Qatari government and Qatar Central Bank (QCB) are implementing a QR75bn or over 10 percent of GDP, as stimulus package.
This is mainly consisting of liquidity injections by the QCB, stock market investments by government funds, support to businesses through loans and guarantees by Qatar Development Bank, and postponement and suspension of fees and taxes by the government.
“We estimate that only around 1 percent-2 percent of GDP of the stimulus package is budgetary, and this will be offset by spending cuts elsewhere”, the rating agency said.
The banking sector is an integral part of Qatar's economic model and the sovereign has an extensive record of supporting it. Bank profitability and capitalisation before the pandemic were sufficient to absorb some worsening of asset quality.
The government's strong overall asset position mitigates some of the risks from contingent liabilities. “We estimate that sovereign net foreign assets (reserves plus other government assets less external debt) rose to 130 percent of GDP ($239bn) in 2019 from 105 percent of GDP in 2018, largely reflecting the estimated assets of the QIA, which were buoyed by strong asset market returns. We expect that the government would be able to obtain significant liquidity from these assets if the need arose, for example in case of a systemic loss of confidence in the banking sector,” the rating agency said.
The QCB's reserves also rose to nearly $40bn or five months of current external payments in 2019 on the back of a modest current account surplus, from over $30bn in 2018. The financial market downturn likely created valuation losses for Qatar Investment Authority (QIA) in early 2020 but conditions have since improved.
