Capital Intelligence upgrades Qatar's foreign and local currency ratings as it finds “favourable” medium-term growth

Global credit rating agency Capital Intelligence (CI) has upgraded Qatar’s long-term foreign currency rating (LT FCR) and long-term local currency rating (LT LCR) to ‘AA’ from ‘AA-’ as it finds the country's short-to-medium-term growth outlook "favourable”.The sovereign’s short-term foreign currency rating (ST FCR) and short-term local currency rating (ST LCR) have been affirmed at ‘A1+’. The ratings have "stable" outlook.The upgrade reflects further improvement in Doha's strong capacity to fulfil its financial obligations in full and on time, supported by favourable budgetary performance, declining central government debt, and improving fiscal flexibility.CI said the short- to medium-term growth outlook remains "favourable", with real GDP (gross domestic product) slated to grow by an average of 3.0% in 2023-24, supported by infrastructure investments at Qatar’s largest gas field, as well as robust performance in the services sectors.The rating also factored in the sovereign’s demonstrated resilience to economic adversities and its capacity to absorb future external or financial shocks, thanks to the large portfolio of foreign assets held by the Qatar Investment Authority (QIA) and consequent comfortable net creditor position.The ratings remain supported by the country’s substantial, low-cost hydrocarbon reserves and increasing liquefied natural gas (LNG) production and export capacity, as well as by its high GDP per capita, strong international liquidity position (including regular current account surpluses and adequate official foreign reserves), and declining gross external debt.Finding that the recent pick up in the pace of structural reforms as supportive of the ratings; CI said these are aimed at modernising labour laws, improving the business environment, and enhancing the role of the private sector in diversifying the economy."The sovereign’s financial buffers have continued to improve since our last review, benefiting from high hydrocarbon prices and strong demand for LNG (liquefied natural gas)," it said.Large budget and current account surpluses have contributed to a further increase in Qatar’s net asset position, with the QIA’s total assets estimated to be 197% of projected GDP this year, according to the rating agency.The central government budget surplus is expected to have reached 12.5% of GDP in 2022 (4.4% in 2021), and is forecast to average 14.8% in 2023-24.l, it said.Qatar’s ratings are underpinned by very large hydrocarbon reserves (around 12.9% of global gas reserves) and associated export capacity, which in turn provide the government with substantial financial means."Given the large hydrocarbon exports and rather small population, GDP per capita is expected to exceed $89,000 this year (higher than similarly rated peers)," it said.