Faster domestic credit and global expansion of local lenders helped banking sector fast enhance its share in the gross domestic product (GDP) of Qatar, whose growth is slated to recover gradually from the Covid-19 over the next two years, according to Capital Intelligence (CI), an international credit rating agency.
"Total banking sector assets as a share of GDP more than doubled to a very high 275% in May 2021, from 120% in December 2012, due to high rates of domestic credit growth and the international expansion of domestic banks," CI said, affirming Qatar's long-term foreign and local currency rating at ‘AA-’.
Although the banking sector’s asset quality is currently good and capital buffers remain strong, banks are exposed to significant lending concentrations (real estate), it however said.
Furthermore, banks’ increasing reliance on foreign funding (particularly non-resident deposits) is considered a potential source of risk.
On the economic growth, CI expects it to recover gradually from the Covid-19 shock over the next two years.
After contracting by 2.6% in 2020, real GDP is forecast to expand by 2.2% in 2021 and 2.6% in 2022, driven by a rebound in both hydrocarbon and non-hydrocarbon GDP.
In view of the comparatively fast pace of vaccinations, CI said "we expect non-hydrocarbon economic activity to pick up from the summer onwards."
According to data from the University of Oxford, 66% of the Qatari population (nationals & expatriates) had received at least one vaccine dose as of mid-July this year.
In late May, the government launched a four-phase-plan to gradually lift Covid-19-related restrictions, with the last phase to be implemented from late July onwards. Furthermore, non-hydrocarbon activity, particularly in the services sector, is expected to be supported by the hosting of the 2022 FIFA World Cup in Qatar.
In terms of the hydrocarbon sector, CI expects a modest rebound of LNG or liquefied natural gas export volumes.
Qatar’s ratings benefit from its very large hydrocarbon reserves (around 12.9% of global gas reserves) and associated export capacity, which in turn provides the government with substantial financial means.
The country’s hydrocarbon bellwether Qatar Petroleum has already outlined its plans to increase LNG production capacity in two stages through the North Field East (NFE) and the North Field South (NFS) projects, which will raise Qatar's LNG production capacity in 2027 by 64% to 126Mtpa.
When NFS is completed, it will raise Qatar's overall hydrocarbon production to about 6.7 million barrels of oil equivalent per day.
QP had raised $12.5bn in a multi-tranche bond offering, which is the largest US dollar fixed rate oil and gas offering and the largest corporate issuance in the Middle East and North Africa region.