Moody's increases his outlook for the Qatar economy to "stable"

Moody's revised outlook on the Qatari economy to a stable outlook after being negative, confirming long-term and unsecured foreign currency ratings at The main reason for the shift in outlook is stable, Moody's believes that Qatar is able to withstand the economic, financial and diplomatic embargo imposed by the three neighboring countries of the GCC, as well as by Egypt (B3 rating, stable outlook) If the blockade continued in the same way And countries besiege new restrictions for a long period of time, it will not result a significant deterioration of the credit record in Qatar. This assessment is based in part on evidence of the resilience of Qatar's credit standards in the face of the economic and financial embargo of the past 13 months.
The Aa3 rating takes into account a number of credit points included in Qatar's credit history, which, from Moody's point of view, remain supported by Qatar's large net assets, exceptionally high levels. per capita income and large hydrocarbon reserves, and the relative decline in the price of oil equivalent to costs, all of which will continue to strengthen Qatar's ability to absorb shocks.
The unsecured rating of Qatar Global Sukuk Company has been confirmed at Aa3. According to Moody's, Qatar International Sukuk's debt securities represent the Government of Qatar's debt securities.
Long-term foreign exchange and long-term deposit ceilings in Qatar remained unchanged and remained at Aa 3. The caps on foreign currency short-term bonds and deposits remained unchanged at P-1 and the long-term local currency bond ceilings remained unchanged. term remained unchanged at Aa3.

Effectiveness of Reorientation Policies
Bid Post-Blockade

A stable outlook reflects Moody's outlook that Qatar's credit ratings will likely remain in line with Aa3 as the blockade increases. continue. The stable outlook includes the possibility of imposing additional restrictions on Qatar, and is also supported by Moody's opinion on the low probability of a quick fix to the GCC's diplomatic confrontation. in the next 12-18 months, as well as the low probability of a major escalation. (A1), Bahrain (B1, negative outlook), and Qatar to the State of Qatar in June 2017, resulting in the closure of established land and maritime trade routes Qatar's sudden decline, its exports of goods and services to the four countries, and a significant outflow of foreign financial resources from the country's banking system.
Rapid restoration of imports, coupled with restoration of primary levels in less than four months, Policies taken to reorient supplies. This included the organization of an airlift to provide food and other food during the first weeks of the blockade, and to increase the capacity of the newly completed Hamad port in order to prevent macroeconomic disturbances and to maintain social stability
. The economic impact of the blockade was simple and temporary in general. The sectors that were clearly affected by the boycott are tourism. The proportion of tourists from GCC countries accounted for about 50% of total tourists in 2016. However, they dropped by 40% and should not recover in a near future. Qatar Airways, which banned flights to 18 destinations in the Middle East, said earlier this year that it had suffered a "heavy loss" in the last fiscal year.

Economic diversification is a guarantee of the effects of the blockade

The blockade has a direct economic impact and the permanent loss of revenue from tourism and transport T key implied, is to prevent the government's efforts to achieve to economic diversification. However, from Moody's point of view, these restrictions on economic diversification do not significantly affect the image of sovereign credit.
Moreover, effective mobilization of funds from central bank reserves and foreign assets to the sovereign fund has maintained macroeconomic and financial stability Faced with the outflow of funds from the Qatari banking system. While these interventions have been detrimental to the physical erosion of central bank reserves, they have also demonstrated the effectiveness of the coordination and crisis management capacities of public institutions, including the Central Bank, the Ministry of Finance and the Central Bank. Finance and the Sovereign Wealth Fund. That is 18% of GDP in the second half of 2017. GCC clients have recovered their deposits and the Gulf banks have withdrawn their funds. Outflows stabilized at the end of 2017 and generated approximately one-third in the first five months of 2018. This enabled the Central Bank and the Qatar Investment Authority (Sovereign Wealth Fund) to repatriate part of their assets. abroad. At the same time, the central bank's foreign exchange reserves increased from $ 13.2 billion at the end of last year to $ 23.3 billion in May 2018 (excluding gold), but remain clearly less than the blockade ($ 33.7 billion). ] The proven financial and institutional capacity to use the sovereign fund's foreign assets is mitigated by Qatar's external vulnerability, due to the strong repayment of the external debt of the economy relative to the level of the central bank's foreign exchange reserves. . As a result, the lack of transparency on the exact size and composition of Qatar Investment Authority (QIA) assets hinders a detailed assessment of Qatar's ability to reduce potential balance of payments pressures.

Prudent Approach to Budgeting
With regard to the budget, the direct financial costs of the embargo imposed by GCC countries have been very limited and have so far been limited to financing the "airlift" during the first two months of the blockade (less than 0.1% of GDP). Moody & # 39; s. Indirect financial costs were incurred due to delays in the implementation of the new revenue procedures planned, including the scheduled service and general service fees for the middle of 2017. These procedures were suspended to allow the private sector to face the blockade, In the estimated government revenue between 1.5 and 2.5% of GDP. However, this decline in revenues has been fully offset by a decline in investment spending and Moody's plans to put in place the deferred revenue procedure in 2018. Similarly, the agency is planning a 5% VAT in early 2019 This will produce up to 0.9% of extra nonhydrocarbon revenues for the budget, putting the tax reform back on track.
Coverage deficit
Any revenue shortfall this year will be offset by a rise in oil prices assumed by the 2018 budget at the level of $ 45 per barrel, and SICO probably much lower than the average level in 2018. This confirms the cautious approach of the authorities in budgeting.
The Sovereign Wealth Fund can easily absorb contingent liabilities that can be made on the sovereign balance sheet in exchange for major losses to Qatar Airways, 100% owned by Qatar Investment Authority. Moody's estimated that the sovereign wealth fund has assets close to 190% of GDP at the end of 2017, compared with 3.3% of Qatar Airways' debt GDP, a fraction of which will be crystallized.

Moody's: Qatar's budget is broadly balanced

Qatar's Aa3 rating is still strongly supported by Qatari government assets, estimated by Moody's at 137% of GDP at the end 2017, a very high per capita income level ($ 61,282) in current US $ and $ 124,520 in P3s, in addition to hydrocarbon reserves (including more than 140 years of natural gas current price.)
Qatar's rating also supports foreign and volatile oil prices, that is, price levels that would balance the government budget and the current account respectively. According to the International Monetary Fund (IMF), the price of a financial reconciliation in Qatar is about 47 dollars a barrel for 2018 (when sovereign wealth revenues are included in revenues), while the price external parity is $ 57 per barrel. And agree with Moody's medium-term assumptions (around $ 45-65 per barrel).
Moody's further predicts that the price of a tax bond will drop by $ 20 in the medium term as the government halves its capital expenditures. After the 2022 World Cup, in addition to increasing the production of liquefied natural gas (LNG) B by 30% for the development of new gas in the northern field between 2023-2024. As a result, the Qatari government's budget is expected to be broadly balanced or to have a medium-term surplus, which would lead to a gradual decline in public debt from about 50% of GDP in 2017 to 40% of GDP at the beginning. of the next decade

Risks on the record
Qatar Credit Balanced

The stable outlook reflects Moody's view that the risks to the country's credit profile are balanced. The sustained and substantial decline in external vulnerabilities is expected to raise the rating level in the light of the decline in external debt and the rebuilding of foreign exchange reserves, especially if accompanied by increased transparency of the external debt. size and composition of the government's financial assets.
On the other hand, Moody's risk of downgrading if regional tensions worsen, (1) would threaten to paralyze Qatar's long-term oil exports and ( 2) weigh on the government with financial pressures on its financial situation, including the sale and purchase of public sector liabilities on a larger scale in the government's balance sheet, and (3) lead to a further substantial decrease external reserves. Any slowdown or decline in financial consolidation, which reflects a more sustainable rise in public debt than Moody's estimates, would result in a drop in the rating.