Arab News, Thu, Mar 21, 2024 | Ramadan 11, 1445
Qatar’s credit rating upgraded to ‘AA’ amidst strong economic outlook: Fitch
Qatar:
Qatar’s long-term foreign currency issuer default rating has been upgraded to
‘AA’ with a stable outlook by Fitch Ratings, driven by the country strengthening
its external balance sheet.
In its latest report, the credit rating agency
highlighted that the change from ‘AA-’ is attributed to Qatar’s substantial
sovereign net foreign assets and a flexible public finance structure.
“The upgrade reflects Fitch’s greater confidence
that debt to GDP (gross domestic product) will remain in line with or below the
‘AA’ peer median after falling sharply in recent years, while Qatar’s external
balance sheet will strengthen from an already strong level,” Fitch stated in the
report.
“Qatar’s ‘AA’ ratings are supported by large
sovereign net foreign assets, one of the world’s highest ratios of GDP per
capita and a flexible public finance structure,” it added.
According to Fitch, an ‘AA’ rating signifies
expectations of very low default risk, indicating a highly robust capacity for
fulfilling financial commitments.
The report, however, added that Qatar’s rating
weaknesses include the country’s heavy dependence on hydrocarbons, below-average
scores on certain governance measures, as well as significant contingent
liabilities.
Fitch further predicted Qatar’s general government
budget surplus to reach 8.6 percent of GDP in 2024, followed by a surplus of 6.2
percent in 2025.
According to the report, the country’s oil and gas
revenues are expected to experience only a marginal decrease, given the
projection that the Brent oil price will average $80 per barrel in 2024.
The US-based agency added that the first phase of
the North Field expansion will begin to support the country’s fiscal revenue
from 2026, while the second phase will contribute to financial growth starting
in 2027.
The report added that Qatar plans to increase
liquefied natural gas production in the North Field from 77 million tons per
annum to 110 mtpa by the end of 2025, reaching 126 mtpa by the end of 2027.
Additionally, Qatar has announced a further expansion to 142 mtpa by the end of
this decade.
Fitch noted that Qatar’s debt-to-GDP ratio is
expected to decrease to approximately 47 percent in 2024 and 45 percent in 2025,
down from a peak of 85 percent in 2020.
The report also cautioned that while Qatar has
largely normalized its relations with other Gulf Cooperation Council countries,
points of tension still persist.
“Qatar continues to position itself as a mediator
in relations between Western powers and Iran and Hamas, among others. The
Israel-Gaza war has caused an increase in regional instability. Qatar has not
been directly affected so far, but risks of escalation persist from the ongoing
conflict in Gaza,” added Fitch.