High energy prices, despite falling below their recent peaks, will support Qatar's strong trade position in 2023-24 and keep external liquidity comfortable, EIU said in its latest country update.
Qatar's sovereign credit strengths are large fiscal and current-account surpluses, which are expected to limit borrowing, and huge external assets. Qatar’s public debt has fallen sharply over the past two years, EIU said and assigned ‘A’ sovereign risk rating.
Although the “negative” net foreign asset position of Qatar's banks remains large, the authorities are taking steps to limit reliance on short-term non-resident deposits and external funding. The sector is "well regulated" and "strong prudential indicators" insulate banks from a deterioration in asset quality.
Bank profitability has been bolstered by higher interest rates and a larger net interest margin, EIU said and assigned ‘BBB’ risk rating to the banking sector.
According to EIU, the currency risk rating is also ‘BBB’. The rating is supported by strong international demand for Qatar's hydrocarbons exports, a large current-account surplus and an appropriate monetary policy stance.
The riyal's peg to the dollar will continue to be backed by healthy foreign reserves and the huge assets of the Qatar Investment Authority (the sovereign wealth fund), which holds assets worth an estimated $475bn.
The economic structure risk rating is ‘BB’. Qatar's over-reliance on hydrocarbons exports remains a vulnerability, exposing the country to global energy price movements, EIU noted.
In a previous update, EIU said the country’s real economic growth will remain stable throughout most of the long-term forecast period (2022-2050).
Elevated global hydrocarbons prices and investment in the Qatar National Vision development plan will sustain robust growth until 2030, after which growth will start to edge down. There remains potential for bursts of high growth if the government approves further gas export projects, beyond those planned for the mid-2020s.
Diversification and the expansion of the services sector, funded by the state's hydrocarbons wealth, will also provide opportunities for growth. The population will gradually rise in the long term, to 3.1mn in 2050.
As a result, growth in real GDP per head will be slower than growth in real GDP, EIU noted.
Qatar's overall business environment score has improved, from 6.60 for the historical period (2017-21) to 7.74 for the forecast period, EIU said. This has helped Qatar's global ranking to improve by 15 places, from 36th to 21st, although it retains its regional ranking, in third place.
The largest improvements in terms of scores are in the infrastructure and market opportunities categories.
“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; these are expected to improve in the medium term,” EIU said.