Global credit rating agency Fitch Ratings yesterday affirmed Qatar’s long-term foreign and local currency IDRs at ‘AA’, with a Stable outlook.
The issue ratings on Qatar’s senior unsecured Foreign-currency bonds are also affirmed at ‘AA’. The Country Ceiling is affirmed at ‘AA+’, and the short-term foreign and local currency IDRs at ‘F1+’.
“Qatar’s ‘AA’ ratings reflect its large sovereign assets (sufficient to finance more than 20 years of present budget deficits), along with its fiscal adjustment efforts, a large hydrocarbon endowment and one of the world’s highest ratios of GDP per capita,” the rating agency said in a statement yesterday.
“The fall in oil and gas prices has resulted in sharply lower government revenues, but a fiscal adjustment is under way. We expect a deficit of 4.3% of GDP in 2016, including estimated income of the Qatar Investment Authority (QIA) of around 5% of GDP,” Fitch said.
Over the past six months, the government has undergone a major effort to re-evaluate its capital spending programme, which had included projects worth a total of QR350bn (close to $100bn or 60% of 2016 GDP) for the period between 2016 and 2022.
The authorities are financing deficits by issuing debt instead of drawing on assets held by the QIA. Qatar made its debut on the eurobond market by issuing $9bn of 5-, 10-, and 30-year bonds in May 2016 with strong demand from investors. This follows a $5.5bn loan syndication in late 2015.
“High but falling government capital spending will not be able to contribute further to growth rates. Instead, non-hydrocarbon growth will come from private investments on the back of government projects, and from accompanying growth in the services sectors (trade, financial intermediation, and real estate),” Fitch said in its statement.
“We expect overall real GDP growth of 3.4% in 2016, after 3.6% in 2015. In our forecast, non-oil growth drops to 6% in 2016 after 8.6% in 2015 and continues to slow in 2017 and 2018.”