S&P Rates Qatar Economic Prospects Negative

Qatar’s economic prospects have been termed “negative” by one of the world’s leading investment organizations, and the Persian Gulf state could see its rating downgraded in light of the sanctions imposed by some Arab regimes.

S&P Global Ratings, one of the “big three” US credit-ratings agencies, said that the outlook for the country’s economic and financial system “primarily reflects our view of the geopolitical risks and potential consequences of the ongoing diplomatic tensions for Qatar’s economic, fiscal, and external metrics, especially if the boycott is tightened or prolonged,” Eurasiareview reported.

Qatar’s economy could further deteriorate if the boycott—led by Saudi Arabia, the UAE, Bahrain and Egypt—is intensified, S&P said in a report issued on Saturday.

“We could lower the ratings if the boycott ultimately has a more severe impact than we currently anticipate, leading, for example, to significant capital outflows or pressures on the hydrocarbon sector. The ratings could also come under pressure if Qatar’s fiscal or external performance turned out weaker than our current forecast.

“Should the boycott drag on, and the Qatari public sector continues to draw on its external assets to support the economy, we could reassess our current estimation of the government’s liquid assets. We could consider a downgrade if we believe the Qatari authorities’ fiscal cushion to absorb additional shocks has reduced,” S&P added.

Since the quartet of Arab countries, later joined by Libya and Yemen, introduced measures against Qatar over its funding of terrorist organizations, its policymakers have been spending huge sums to compensate for lost trade, tourism and transport links with its neighbors.

The situation could deteriorate further if the Saudi-led group increases financial pressure by closing or appropriating Qatar’s financial assets across the region, which have so far been left largely untouched.

“The Qatari authorities continue to effectively use the country’s large fiscal and external assets to mitigate the impact of an ongoing Saudi-led boycott. Nevertheless, the boycott is expected to continue for an extended period, with no clear resolution in sight,” S&P judged, ranking Qatar’s long- and short-term foreign and local currency sovereign ratings at AA- and A-1+, below prime investment-grade status. In contrast, S&P rates Saudi Arabia and the UAE economic outlooks as “stable.”

The report also raises questions about the ability of the Qatari political system to withstand a long-term anti-terror campaign.