S&P lowers Qatar outlook to negative

Ratings firm Standard and Poor’s has revised its outlook for Qatar to negative due to concerns that the country’s external debt could outpace liquid asset growth.

In a report, the company said it would affirm Qatar’s ratings at AA/A-1+ but noted banks’ rapid growth of foreign liabilities and public sector debt pushing up the country’s external financing needs.

Qatari banks external liabilities increased by 24 per cent of GDP last year, it noted, with non-resident deposits up 17 per cent and public sector external debt up 14 per cent due to government deficit financing.

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“We now estimate liquid external assets to exceed external debt by 100 per cent of current account receipts (CARs) and gross external financing needs at 167 per cent of CARs plus usable reserves, compared with 147 per cent and 146 per cent respectively in our last publication in September 2016,” S&P noted.

Future growth on nonresident deposits at a similar pace to last year would put pressure on ratings, the company added, highlighting that Qatar’s external stock position was still strong.

In the wider report, S&P said current account data to the third quarter indicated a wider deficit in the country than it anticipated but it expected higher hydrocarbon prices to boost fiscal revenues and reduce deficits.

The company forecast a deficit of 7 per cent of GDP in Qatar this year, gradually falling to balance by 2018 and 2019, with a similar pattern expected for debt.

S&P also said it expected the Qatari riyal’s peg to the US dollar to be maintained and forecast capex would account for nearly 50 per cent of government spending this year.

“We expect that government liquid assets will remain around 160 per cent of GDP, reflecting the sizable funds built up from gas related surpluses and subsequent investments.”