Qatar’s ability to fully service its debt obligations remains strong, despite the economic shock from the coronavirus (Covid-19) pandemic and a collapse in oil prices, The Economist Intelligence Unit (EIU) has said in its latest country overview.
This is supported by ample foreign reserves and the assets of the Qatar Investment Authority (QIA, the country's sovereign wealth fund), EIU noted.
Qatar’s banking sector is supported by a “robust” regulatory framework and “solid” capital and liquidity indicators, it said. Commercial banks have been increasing liquidity from abroad in the form of a number of debt issues, and cash injections from the QIA have bolstered banks' liquidity.
The ratio of non-performing loans as a proportion of total loans has historically been low, but it is likely to rise in the short term, EIU said and indicated the country’s banking sector risk is BB-rated.
Although export earnings are expected to fall in 2020, EIU noted the riyal's peg to the US dollar is backed by “healthy” foreign reserves and QIA assets.
“The current account will move into deficit in 2020, but the currency regime is expected to weather the short-term shocks posed by the pandemic. Currency risk is B-rated,” the EIU overview showed.
Qatar's “overdependence” on hydrocarbons exports leaves it exposed to global price movements, EIU said. In the short term, policy will continue to focus on addressing the economic fallout from the coronavirus pandemic and weak international oil prices.
Qatar's large stock of public debt “weighs” on the outlook, but a sound financial system is supportive and said the economic structure risk is B-rated.
According to EIU, Qatar's overall business environment score has improved from 6.7 for the historical period (2015-19) to 7.2 for the forecast period (2020-24). This has helped Qatar's global ranking improve by seven places from 35th to 28th, although its regional ranking remains steady at third.
“The largest improvements, in terms of scores, are in the categories of infrastructure and of policy towards private enterprise and competition,” EIU noted.
“On the negative side, the impact of the pandemic on both the Qatari and the global economy has had a negative effect on the macroeconomic environment. The score in this category has fallen, although its regional ranking has risen to first, suggesting the Qatari authorities have done a better job at handling the economic fallout from the pandemic than its neighbours,” EIU said.
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