Qatar’s credit ratings in question as crisis deepens

CAIRO – 15 June 2017: As diplomatic rift between Qatar, Saudi Arabia, UAE, Bahrain and Egypt is not anticipated to resolve over the short term, economic analysts warned about the negative impact on Doha’s rating.

Two days after the cut in ties, global credit rating agency Standard and Poor’s lowered Wednesday Qatar's long-term rating from 'AA' to 'AA-' on negative implications of the decision.
“We believe the recent developments might result in an outflow of external funding for Qatari banks over the next few months, depending on how the situation evolves,” said S&P Global Ratings credit analyst Mohammad Damak told Gulf News.

The downgrade is also expected to be worse on predictions of more pressure on the economic growth, S&P’s credit analysts Benjamin Young said in the same report.
Rating agencies Moody’s and Fitch have expressed concern as well. In the second week, Fitch said a downgrade in Qatar’s credit rating is possible over concerns of deepening the crisis.

“While some discussions have taken place to resolve the crisis, it is becoming more likely that the crisis will be sustained and negatively affect Qatar’s economy and its credit metrics,” said Fitch Gulf analyst Krisjanis Krustins.

Krustins explained that although the vast resources Qatar owns, which allowed it to overcome the negative impact on its food imports, “this cost will be borne by the government.”

Also, in its weekly report, Moody’s assessed the rift would be credit negative for Qatari banks, expecting funding costs for Qatari banks would increase for debt securities, with risks imposed for withdrawals from non-resident deposits and interbank facilities.

In that domain, Middle East economist for London-based consultancy Capital Economics Jason Tuvey said in a report this week that investors in Qatar should be concerned about the banking performance in the gas-rich country.

“If Qatari banks struggle to rollover their external debts, they could be forced to shrink their balance sheets and tighten credit conditions,” said Tuvey.

The Qatari government is now obliged to meet the aforementioned economic challenges, to overcome the negative impact on its long-time strong economy.