As per the latest rating, Moody’s has placed Qatar on ‘Aa2’ with “stable” outlook; Standard and Poor’s (S&P) at ‘AA’ with “stable” outlook and Fitch at ‘AA’ with “stable” outlook.

By Santhosh V Perumal/Business Reporter


Qatar’s credit rating is expected to be unchanged this year due to institutional constraints; even as a prolonged oil price downturn is likely to start reversing the Gulf Co-operation Council (GCC) ratings cycle, Bank of America Merrill Lynch (BofAML) has said.
“We expect ratings will be unchanged this year, as in our view, they are constrained by institutional factors rather than macroeconomic performance, and as sovereign wealth cushions for now,” BofAML said in its latest report.
Qatar saw its credit rating increase by four notches since 2002, it said.
As per the latest rating, Moody’s has placed Qatar on ‘Aa2’ with “stable” outlook; Standard and Poor’s (S&P) at ‘AA’ with “stable” outlook and Fitch at ‘AA’ with “stable” outlook.
The other Gulf ratings that are expected not to change include Abu Dhabi and Kuwait; while a prolonged period of low oil prices raises material risks of a downgrade for Bahrain, given the elevated fiscal breakeven oil price, according to the report.
Pressure on external and fiscal balances due to low oil prices should weigh on Moody’s rating on Oman given the several notch rating differential versus S&P, BofAML said, adding as part of S&P’s recent downgrade to the credit outlook on Saudi Arabia, the agency suggested it could lower the ratings over the next two years if the government’s liquid assets fell well below 100% of gross domestic product or if overall fiscal performance “significantly weakened”.
On the GCC as a whole, BofAML said a prolonged oil price downturn is likely to start reversing the region’s ratings cycle as sovereign credit-worthiness and buffers gradually erode to support a smoother path for domestic activity.
On average, the GCC has benefited from three notch rating upgrades over the period 2002-10 prior to the start of the Arab Spring, BofAML said.
The subsequent downgrades of Bahrain and Oman, and the upgrades of Kuwait and Saudi Arabia bring the average GCC rating upgrade since 2002-to-date to a still high 2.5 notch.
Over the medium-term, within the GCC, “we see more relative rating pressure on the lesser per capita-endowed countries (Bahrain, Oman and Saudi Arabia)”, it said, adding “the bottom of the rating cycle may be higher this time, though this would depend on oil prices and fiscal policy.”
The report highlighted that the reversal of the terms-of-trade shock would also be another headwind onto the potential secular waning of the credit cycle, a closely related theme.
Finding that the GCC was a beneficiary of both commodity and credit waves, BofAML said “as US-imported monetary policy turns gradually less accommodative and domestic liquidity tightens, credit growth is likely to weaken and contribute to slower domestic activity.”

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