Qatar rift could lead to credit rating downgrade and lower non-oil growth
The decision by the UAE, Saudi Arabia, Bahrain and Egypt to cut diplomatic and transport ties with Qatar could lead to another credit rating downgrade by Moody’s and lower non-oil growth, a rating analyst said yesterday.
Moody’s downgraded Qatar’s rating last month to Aa3 from Aa2 and changed the outlook to stable from negative because of doubts about the country’s growth trajectory and its sharply rising external debt.
It said any deterioration of the domestic or regional political environment that results in disruptions to oil and gas production and/or foreign investments in the economy would be credit-negative for the country.
“The last bout of tensions between Qatar and other GCC countries ended with no credit implications for the Qatari sovereign,” said Mathias Angonin, a sovereign analyst at Moody’s.
“However, the blocking of sea and air travel from UAE, Saudi, and Bahrain to Qatar could be credit-negative if it disrupts trade and capital flows to Qatar.”
In 2014, the UAE, Saudi Arabia, and Bahrain recalled their ambassadors from Qatar, but without severing economic ties.
Qatar’s economy, which grew 2.7 per cent last year and is set to expand 3.4 per cent this year according to IMF estimates, could be hit in the wake of this latest dispute with its GCC neighbours.
“Project implementation could slow in Qatar, leading to lower than expected non-oil growth,” said Mr Angonin.
“There is no indication yet that Qatar’s oil and gas exports or the government’s fiscal deficit will be affected.”
The rating agency S&P Global Ratings in March downgraded its outlook for Qatar to negative from stable on concern that the growth of the country’s external debts may continue to outpace the growth of the size of its investments internationally.
However, S&P maintained its AA/A-1+ rating on the country, putting it firmly in the high quality credit rating band on the agency’s rating scale.
S&P declined to comment on the impact of the latest Qatar rift on its credit rating.
Fitch, which has an AA rating for Qatar with a stable outlook, could not be reached for comment.
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Updated: June 5, 2017 04:00 AM