Global credit rating agency Capital Intelligence (CI) has affirmed Qatar’s long term foreign and local currency ratings at ‘AA-’ and the corresponding short term ratings at ‘A1+’.

Qatar has weathered the strong decrease of oil and gas prices since summer 2014 and the economic implications of the blockade since June last year, it said.
Qatar’s external financing requirements are expected to remain high in 2018 (51.6% of gross domestic product or GDP) and 2019 (51.7% of GDP), it said, adding these “substantial” needs result largely from high gross external debt rollover needs of domestic banks as the credit boom of the past was increasingly on cross-border funding.
As a result, Qatar’s overall gross external debt stood at a comparatively high 100.3% of GDP at year-end 2017, CI said.
"At present, CI views that the country’s external refinancing risks appear manageable; however, the strained relationship with other GCC member states and the substantial geopolitical risk factors could weigh on risk perceptions, which would adversely affect the access and cost of cross-border funding," it cautioned.
The rating agency considers the domestic banking sector as an important implicit contingent liability of the central government since the size of the banking sector has risen tremendously over the past decade.
As a result of the large expansion of domestic credit to public and private sectors, the total assets of the domestic banks increased to a very high 223.5% of GDP in 2017, up from 101.4% of GDP in 2007.
In particular, CI regards the high net external debtor position of domestic banks (20.9% of GDP in 2017) as an important risk factor for government finances. In addition, the recent downward trend of realty prices poses an important risk for the domestic banking sector as about 23% of domestic lending falls upon the real estate and construction sectors as of May 2018.
So far however, the decline of real estate prices has not led to a marked deterioration in the asset quality of commercial banks in Qatar, it said, finding that as of December 2017, the average non-performing loans were at a low of 1.6% of total gross loans (1.3% in 2016).
Qatari banking sector benefits from a strong capitalisation (average capital adequacy ratio at year-end 2017 was 16.8%) and good profitability (return on average assets was 1.5%), it said.
Notwithstanding large implicit contingent liabilities, CI said, Qatar’s credit ratings continue to be supported by a moderate level of central government debt.
Even though central government gross debt has increased substantially over the past three years, it regards the current level of central government gross debt as still “moderate” (53.6% of GDP in 2017). Moreover, the central government gross debt-GDP ratio is slated to stabilise this year at 54.6% and 2019 (52.2%) on the back of an improving government budget balance.
After registering deficits of 4.7% and 1.6% in 2016 and 2017 respectively, CI expects the central government budget balance to turn positive again in 2018 (2.7% of GDP) as a moderate rebound of oil and gas prices and a slight increase in production is projected to raise government revenues.
In addition, government finances are bolstered by a very large stock of government assets under the management of the Qatar Investment Authority (QIA).
The International Monetary Fund estimates the total stock of QIA assets at a very high $337bn in 2017 (201% of GDP).

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