A robust regulatory framework and solid capital and liquidity indicators have helped improve the risk position of Qatari banks, the Economist Intelligence Unit said in its latest update.
The country’s commercial banks have been increasing liquidity from abroad in the form of a number of debt issues, and cash injections from the sovereign wealth fund, the Qatar Investment Authority (QIA) have bolstered banks' liquidity.
The ratio of non-performing loans as a proportion of total loans has historically been low, but is likely to rise in the short term, the EIU said.
The riyal's peg to the US dollar is backed by “healthy” foreign reserves and QIA assets; the EIU said but noted the export earnings are expected to fall in 2020.
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.
Qatar's ability to fully service its significant debt obligations remains strong, supported by ample foreign reserves and the assets of the QIA.
The economic shock from the coronavirus (Covid-19) pandemic and a collapse in oil prices are expected to lead to a drop in export earnings and a shift to fiscal deficit.
According to the EIU, in the short term, policy will continue to focus on addressing the economic fallout from the pandemic and weak international oil prices. Qatar's large stock of public debt weighs on the outlook, but a sound financial system is supportive.
In its previous economic update, the EIU noted Qatar’s real economic growth will remain stable throughout most of the long-term forecast period (up to 2050). However, economic diversification investment projects will sustain robust growth until 2030, after which growth will start to edge down.
There remains potential for bursts of high growth if further gas export projects, beyond those planned for the mid-2020s are approved by the government. Diversification and the expansion of the services sector, funded by the state's hydrocarbons wealth, will also provide opportunities for growth.
The population will continue to increase, largely through immigration, to 3.9mn in 2050. As a result, growth in real GDP per head will be much slower than growth in real GDP, the EIU said.