Qatar’s sovereign ratings affirmed with “stable” outlook

Capital Intelligence (CI) has affirmed the long-term foreign currency rating (LT FCR) and long-term local currency rating (LT LCR) of Qatar at ‘AA’.
The sovereign’s short-term (ST) FCR and ST LCR have been affirmed at ‘A1+’. The outlook for the ratings remains "stable".
The ratings reflect Qatar's very strong external balances and budgetary performance, supported by favourable liquefied natural gas (LNG) prices.
CI factored in the country’s capacity to absorb future external or financial shocks given the large portfolio of foreign assets held by the Qatar Investment Authority (QIA) and the consequent comfortable net external creditor position.
The ratings continue to be supported by Qatar’s substantial low-cost hydrocarbon reserves, increasing LNG production and export capacity, high GDP (gross domestic product) per capita, and adequate official foreign reserves. It views the recent pickup in the pace of structural reforms as a supporting factor for the ratings.
Finding that the financial buffers have continued to improve since last review, benefitting from favourable hydrocarbon prices and strong demand for LNG, it said very 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 202.7% of projected GDP this year.
The central government budget surplus reached 14.2% of GDP in 2022 (4.3% in 2021), and is forecast to average 12.8% in 2023-25.
"While the reliance on hydrocarbon revenues remains a rating constraint, the government has ample leeway to respond to severe fluctuations in hydrocarbon prices given the size of fiscal buffers and the degree of expenditure flexibility," CI said.
Central government deposits stood at 11.2% of GDP in May 2023, while total government and government institutions’ deposits in the domestic banking system alone were around 36.1% of GDP.
According to CI’s estimates, gross central government debt (including short-term treasury bills and bank overdrafts) decreased faster than previously expected to 50.8% of GDP in 2022, from 73.5% in 2021, reflecting nominal GDP growth and a large primary budget surplus.
It expects debt dynamics to remain “favourable” in the medium term, resulting in a further decrease in the central government debt ratio to 43.4% in 2025.
Current account performance remains very strong, with the surplus increasing to 26.3% of GDP in 2022 (14.5% in 2021) and to 5.3% in Q1 23 (from 4.6% in Q1 22).
"The current account is slated to remain in very large surplus, averaging 14.5% of GDP in 2023-25," it said.
Gross external debt decreased to 149.8% of current account receipts in 2022, from 263.2% in 2021, while official foreign exchange reserves rose to $63.2bn from $57.7bn the same period.
Highlighting that Qatar’s economic strength is moderate; it said economic activity has picked up since 2021 due to the rebound in both the hydrocarbon and non-hydrocarbon sectors.
Highlighting that real GDP growth reached 4.7% in 2022, compared to 1.6% in 2021, and expanded by 2.7% in Q1 23; it said the short- to medium-term growth outlook remains relatively favourable, with real GDP expected to grow by an average of 2.5% in 2023-25, supported by infrastructure investments at Qatar’s largest gas field, as well as robust performance in the services sectors.
Qatar’s ratings are underpinned by sizeable 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 $83,900 this year (higher than similarly rated peers)," CI said.