Qatar's external liquidity is “comfortable” on “strong” trade position supported by high energy prices, the Economist Intelligence Unit (EIU) has said in its latest country update.
The country’s sovereign credit strengths, it said, are large fiscal and current-account surpluses, which are expected to limit borrowing, and huge external assets.
Also, Qatar’s public debt has fallen sharply over the past two years, EIU said and noted sovereign risk rating remains ‘A’.
With regard to Qatar’s currency – riyal, EIU said, its 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 are worth an estimated $475bn.
The currency risk rating is ‘BBB’. The rating, EIU said, is supported by strong international demand for Qatar's hydrocarbons exports and by a large current-account surplus.
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, EIU noted. “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. The banking sector risk rating is BBB,” EIU remarked.
Qatar's over-reliance on hydrocarbons exports remains a “vulnerability”, exposing the country to global energy price movements, EIU said.
The economic structure risk rating is ‘BB’.
In its previous update, EIU said Qatar's overall business environment score has improved, from 6.60 for the historical period (2017-21) to 7.74 for the forecast period.
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 noted.
"Bank profitability has been bolstered by higher interest rates and a larger net interest margin. The banking sector risk rating is BBB,” says EIU.
