Credit-rating giant Moody’s decision to change the outlook on the Government of Qatar’s long-term issuer ratings to stable, from negative, underscores how resilient is Qatari economy to the unprecedented and unjust blockade imposed on it by the Arab quartet.
The global ratings agency in its latest report has unequivocally stated “ Qatar can withstand the economic, financial and diplomatic boycott by the three neighbouring Gulf Cooperation Council countries and Egypt in its current form, or with possible further restrictions, for an extended period of time without a material deterioration of the sovereign’s credit profile.
This assessment is in part based on evidence of broad resilience of Qatar’s credit metrics to the economic and financial blockade over the past 13 months.” Moody’s has also affirmed Qatar’s long-term issuer and foreign-currency senior unsecured debt ratings at Aa3.
Moody’s announcement comes close on the heels of International Monetary Fund’s (IMF) announcement the economic and financial blockade on Qatar is fast fading. In March last, the IMF announced that Qatar’s GDP, despite the blockade, is expected to grow at 2.6 percent in 2018 noting that the country’s medium-term macro-financial outlook will remain broadly favourable. The Fund had said the implementation of the public investment programme and the ease in the pace of fiscal consolidation would help support growth.
The IMF said the effect of the blockade on economic activity in the Qatar had been transitory as new trade routes were quickly established and growth remained positive. Though foreign financing and resident private sector deposits had fallen, but they had been offset by cash injections by the central bank and Qatar Investment Authority (QIA), it said.
The Fund observed that Qatar’s public debt, estimated at 54 percent of the GDP as at the end of 2017, remains sustainable, given the size of the country’s sovereign wealth fund (SWF). The current account is improving in the context of increased oil and gas prices, and contraction in imports.
Moody’s yesterday’s announcement reconfirms Qatar’s credit strengths. According to Moody’s, the rating affirmation at Aa3 takes into account a number of credit strengths embedded in Qatar’s credit profile.
In Moody’s views Qatar’s credit profile remains supported by the large net asset position of Qatar’s government, high levels of per-capita income, large hydrocarbon reserves and relatively low fiscal and external breakeven oil prices. All of these will continue to provide a significant shock absorption capacity to the sovereign.
The blockade could not affect the fulfillment of Qatar’s commitments to supply gas to its global customers, as it is the largest exporter of LNG. The attempts to harm the national currency were not successful due to prudent monetary policy adopted by the Qatar Central Bank (QCB).
