The stronger dollar has supported the dollar-pegged Qatari riyal (at QR3.64), and there is only a very small chance of de-pegging, Oxford Economics said in its latest country report.
Qatar’s exchange rate risk on an Oxford Economics data-driven methodology is now 2.3, up 0.2pts from six months ago but well below the Mena average of 4.5.
The low risk score reflects the authorities’ long-standing commitment to the dollar peg, as well as large FX reserves. Risk rose in 2020 as the current account moved into deficit, but the score improved as the current account moved back to surplus in 2021, as exports recovered and oil and gas prices improved from the lows in 2020.
The current account surplus has widened this year and will average 15% of GDP in 2022-23, Oxford Economics said.
The sovereign credit risk score under Oxford Economics methodology is 3.4, unchanged from six months ago and well below the Mena average of 4.5. The score, it said reflects very high per capita incomes, large government reserves, strong external finances, and political stability.
The budget deficit in 2017 was temporary, and the budget returned to surplus in 2018. However, it began to narrow again in 2019 and, given the slump in oil and gas prices, moved into deficit of 2.1% of GDP in 2020.
The balance returned to surplus in 2021, which should rise close to 9% of
GDP in 2022-2023 due to higher oil and gas revenues, Oxford Economics said.
The country’s trade credit risk – a measure of private sector repayment risk – remains very low by regional standards at three, compared with the regional average of 6.1. The main factors underpinning this rating are macroeconomic stability, the credible and well-established exchange rate regime, strong growth, very high GDP per capita, and a healthy, well-developed banking sector, the researcher noted.
Higher oil prices should support bank liquidity, despite rising exposure to construction and real estate and persistent foreign funding risk.
Concerns about the deteriorating global outlook have yet to overshadow the boost to Qatar from the month-long World Cup tournament, which ends on December 18.
“We expect Qatar's recovery will continue in 2023, with strong gas demand continuing to support energy exports and output. That said, the fall in the manufacturing PMI below the 50-mark in October indicates moderating non-oil sector activity, consistent with our 2023 GDP growth forecast of 2.7%, after the 5.2% expansion seen this year,” Oxford Economics noted.