Qatar’s fiscal account will return to surplus this year aided by recovering global oil prices, Economist Intelligence Unit (EIU) has said in an economic update.
“This will ease public debt pressures,” EIU noted in its latest Qatar update.
The end of blockade in January this year by the Arab quartet has considerably lessened economic risk stemming from regional disputes, it said.
Qatar's ability to fully service its large debt obligations remains strong, supported by ample foreign reserves and the assets of the Qatar Investment Authority (QIA, the sovereign wealth fund), EIU said and indicated the sovereign risk as ‘BBB-rated’.
On currency, EIU noted the Qatari riyal's peg to the US dollar will continue to be backed by “healthy” foreign reserves and QIA assets. Currency risk is BB-rated. The rating is supported by a recovery in international oil prices and an expected shift from deficit to surplus on the current account in 2021.
Qatar’s banking sector, EIU said is “well regulated”, and “although net external liabilities pose risks, strong prudential indicators insulate banks from a deterioration in asset quality arising from last year's recession. The non-performing loan ratio is low, and profitability levels are moderate.”
The country’s banking sector risk is also BB-rated.
Qatar's overdependence on hydrocarbons exports leaves it exposed to global price movements. In the short term policy will continue to focus on addressing the fallout from the pandemic.
Qatar's large stock of public debt weighs on the outlook, but a sound financial system is supportive, EIU said and indicated that the economic structure risk as B-rated.
Qatar's overall business environment score has improved from 6.7 for the historical period (2015-19) to 7.2 for the four-year forecast period up to 2024, EIU noted earlier. This has helped Qatar's global ranking improve by seven places from 35th to 28th, although its regional ranking remains steady at third.
“The largest improvements, in terms of scores, are in the categories of infrastructure and of policy towards private enterprise and competition. On the negative side, the impact of the pandemic on both the Qatari and the global economy has had a negative effect on the macroeconomic environment. The score in this category has fallen, although its regional ranking has risen to first, suggesting the Qatari authorities have done a better job at handling the economic fallout from the pandemic than its neighbours,” EIU said.