Fitch Ratings said Qatar’s ‘AA-‘ ratings are supported by its large sovereign net foreign assets.
Qatar’s credit rating has been revised from stable to positive by top US credit rating agency Fitch Ratings, which pointed to the Gulf state’s major LNG expansion plans.
Fitch Ratings said its move to revise the Long-Term Foreign-Currency Issuer Default Rating outlook reflects its “expectation that debt to GDP will remain in line with or below the ‘AA’ peer median, while Qatar’s external balance sheet will strengthen from an already strong level.”
“The additional LNG export capacity that will be brought online as a result of the North Field expansion will bring down Qatar’s already low fiscal breakeven hydrocarbon price,” the rating agency said, announcing the change.
It said Qatar’s ‘AA-‘ ratings are supported by its large sovereign net foreign assets, its boasting one of the world’s highest ratios of GDP per capita as well as its flexible public finance structure.
However, rating weaknesses include higher government debt/GDP than oil-dependent highly-rated peers and substantial contingent liabilities, heavy hydrocarbon dependence and below average scores on some measures of governance, Fitch Ratings said.
Qatar is currently seeking to secure potential clients for its multi-billion plan North Field Expansion Project which is set to drastically increase the Gulf nation’s liquefaction capacity by 64% by 2027.
The first phase of the North Field expansion is expected to “start supporting fiscal revenue fully from 2026 and phase two in 2027, assuming no construction delays, and to bring down Qatar’s fiscal breakeven oil price below $50 per barrel from around $57-58 per barrel in 2023-24, excluding estimated QIA investment income, the agency said.
Fitch Ratings also projected debt/GDP to fall to about 45% of GDP in 2023 and 42% in 2024, from a peak at 85% in 2020, noting this reflects its expectation that the government will continue to repay maturing external debt in 2023 (USD7.5 billion) and 2024 (USD4.8 billion) and to gradually pay down some of its domestic debt. Large surpluses will still allow Qatar to transfer new funds to the QIA, it added.
Meanwhile, the wrap up of the FIFA World Cup Qatar 2022 has led to a slowdown in the local economy, with Fitch projecting Qatar’s GDP to expand by just 0.7% this year compared to 4.8% last year when the world’s biggest sporting event was hosted in the Gulf state.
The agency also cited geopolitical calm in the region, following the end of the 2017 GCC crisis, in which Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed ties with Qatar and imposed an illegal air, land and sea blockade. In 2021, all parties to the crisis came together to sign the Al Ula Agreement that essentially buried the hatchet and led to the resumption of ties.
Fitch also pointed to Qatar’s importance in global energy markets which it said is being magnified by Europe’s push to reduce its dependence on Russian gas, with Germany and Qatar reaching a gas supply deal.
Qatar also continues to position itself as a mediator in relations between Western powers and Iran and the Taliban, among others, it added.