Qatar’s macroeconomic indicators have improved following the pandemic-induced slump in 2020, returning to positive economic growth, researcher EIU has said in a recent assessment.
The country’s fiscal account will return to surplus this year owing to recovering global oil and gas prices, easing public debt pressures. Qatar's debt obligations are high, but its ability to fully service them is not in doubt, supported by ample foreign reserves and the assets of the Qatar Investment Authority (QIA, the sovereign wealth fund).
EIU’s sovereign risk remains BBB-rated, although the underlying score has improved by four points, to 36, reflecting EIU's assessment of improved macroeconomic indicators.
According to EIU, the Qatari riyal's peg to the dollar will continue to be backed by healthy foreign reserves and QIA assets. The currency risk rating remains at BB, although the underlying score has improved by two points, to 42.
The rating is supported by a recovery in international hydrocarbons prices and an expected shift from deficit to surplus on the current account in 2021.
In its assessment of the country’s banking system, EIU said the net foreign asset position of banks is sizeable but manageable. The sector is well regulated, and while net external liabilities pose risks, strong prudential indicators insulate banks from a deterioration in asset quality arising from the 2020 recession. The non-performing loan ratio is low, and profitability levels are moderate.
The economic structure risk rating is unchanged, at B, and the score is unchanged, at 53, EIU noted.
“Qatar's overdependence on hydrocarbons exports leaves it exposed to international price movements. The Qatar National Vision 2030 diversification programme will shape policy. Qatar's large stock of public debt weighs on the outlook, but a sound financial system is supportive,” EIU said.
In an earlier update, EIU said Qatar's overall business environment score has improved from 6.56 for the historical period (2016-20) to 7.35 for the forecast period.
This, EIU noted has helped Qatar's global ranking to improve by eight places from 36th to 28th, although its regional ranking remains steady at third. The largest improvements, in terms of scores, are in the categories of infrastructure and market opportunities.
“Qatar's fairly open foreign investment regime, open trading relationships with regional partners and sophisticated capital markets will remain strong aspects of its business environment. The main shortcomings are in policy towards private enterprise and competition and in access to financing for small and medium-sized enterprises,” EIU said.