Mubasher: Capital Intelligence Ratings (CI) has affirmed Qatar's Long-Term Foreign Currency and Local Currency Ratings of 'AA-' and its Short-Term Foreign and Local Currency Ratings of 'A1+', according to a recent report.
The ratings agency has also revised the outlook for Qatar from Stable to Negative.
The revision of the outlook reflects the adverse impact on the country's economic performance stemming from relatively low hydrocarbon prices and elevated geopolitical uncertainties, as Qatar is likely to face continuing fiscal and external challenges.
In an unprecedented move in June, six countries, of which three are GCC member states, namely Saudi Arabia, the UAE, and Bahrain, alongside Egypt, severed their diplomatic ties with Qatar over claims of terrorism financing.
They also prohibited Qatar from the use of their land, air and water routes in the movement of people and goods, as well as requiring that all Qataris leave their countries.
CI Ratings believes that any further increase in tension in the GCC area or prolonged isolation would adversely impact Qatar's economic growth while also exacerbating the vulnerabilities in external balances and the government's fiscal balances.
The crisis could lead to an increase in investors' risk perceptions, the report noted, adding that higher risk perceptions are in turn likely to lead to a higher cost for and lower availability of cross border funding for the government of Qatar and its banks, especially given that Qatar's external debt is higher than its regional peers, reached about 130% of GDP in 2016.
The crisis has also led to a disruption in trade routes, and higher shipping costs combined with longer routes, and an environment of continued relatively low hydrocarbon prices will weigh on the country's external balances.
CI pointed that 10% of Qatar exports go to the dispute states, while 15% of its imports come from them.
The downside risks to growth have become more pronounced, as growth in real output is expected to average around 2.9% in 2017-19, after it had already slowed in 2016 to 2.2%, from 3.6% in 2015 due to a slower growth in the non-hydrocarbon sector.
CI expects the budget deficit to narrow to 0.6% of GDP in 2018. However, should hydrocarbon prices be lower than expectations, this could lead to higher than projected deficits in the absence of substantial fiscal consolidation measures.
