Standard and Poor’s has raised Qatar’s sovereign credit rating to AA from AA-, the third highest rating possible. The change has come because of the strong fiscal growth the country is currently enjoying. Qatar’s GDP will rise 11% in 2010 on the back of rising gas output; Qatar is also expected to reach its production targets of 77 million tpy by 2012 with the addition of three new liquefaction trains. This makes Qatar the Gulf state with the highest credit rating, Saudi Arabia, the largest regional economy has a credit rating of AA- and Abu Dhabi in the United Arab Emirates also has a rating of AA.
“The upgrade is based on the government’s strengthening fiscal and external balance sheets, with strong growth prospects spurred by new large LNG projects in 2010 - 2012,” said S&P’s credit analyst Luc Marchand. Qatar supported its financial institutions through the 2008 financial crisis, providing banks with capital investment buying up their property and equity portfolios.
“Conversely, the ratings could be lowered by several notches if regional geopolitical risks were to escalate sharply, threatening Qatar’s political and economic stability. If political stability were to be compromised by domestic events, the ratings on Qatar could also come under pressure.”
Ongoing political risks, such as those posed by the growing isolation of Iran and new sanctions were also highlighted as potential problems.
The report also highlighted other failings, pointing out that a lack of government transparency and weak public institutions would need to be resolved in order for a better rating to be considered in the future.
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