State of Qatar Ratings Affirmed At ‘AA-/A-1+’; Outlook Negative Ratings: Foreign and Local Currency: AA-/Negative/A-1+

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Overview

  • We expect the ongoing boycott of Qatar’s economy will lead to slower economic growth and hamper fiscal and external performance as outflows of external financing are offset by drawing upon government assets.
  • The Qatari authorities are utilizing the country’s large fiscal assets to limit the impact.
  • We are affirming our ‘AA-/A-1+’ ratings on Qatar and removing them from CreditWatch with negative implications.
  • The negative outlook reflects our view of the potential consequences of the boycott on Qatar’s economic, fiscal, and external metrics, especially if the boycott is tightened or prolonged.

Rating Action

On Aug. 25, 2017, S&P Global Ratings affirmed its ‘AA-/A-1+’ long- and short-term foreign and local currency sovereign ratings on the State of Qatar. The outlook is negative. The ratings were removed from CreditWatch with negative implications, where we placed them on June 7, 2017. The transfer and convertibility (T&C) assessment is ‘AA’.

Outlook

The negative outlook reflects our view of the potential consequences of the boycott on Qatar’s economic, fiscal, and external metrics, especially if the boycott is tightened or prolonged. We could lower our ratings on Qatar if the boycott reduces economic wealth levels to an extent that we no longer assess GDP per capita as a sufficient cushion to offset Qatar’s weak trend growth rate. We could lower the ratings if policy predictability in Qatar were to become more uncertain. In order to support its economy and banking system, the Qatari government is liquidating and utilizing part of its fiscal assets. If our estimate of the government’s liquid assets were to fall substantially, we could also lower the ratings. We could raise the ratings if we saw domestic institutions mature faster than we expected, alongside significant improvements in transparency regarding government assets and external data quality