In its annual report on Qatar, Moody's Investors Service says the country's investment grade country ceiling and stable outlook are supported by the country's rapidly expanding gas exports and high level of economic development.
The foreign currency country ceiling for bonds is Aa2, based on the foreign currency government bond rating of Aa3 and Moody's assessment of a low risk of a payments moratorium in the event of a government default.
"Qatar has the third-largest proven gas reserves in the world with less than one million inhabitants ," said Moody's Assistant Vice- President Kenneth Orchard, author of the report. "The magnitude of the country's hydrocarbon exports has enabled Qatar to run sizeable fiscal and external current account surpluses in recent years despite high levels of investment."
As a result, he said, Qatar has one of the highest levels of GDP per capita in the world, and it is likely to increase over the medium term as the country's gas and gas-based exports continue to multiply. Both the public and private sector hold significant assets abroad. The Government's net asset position (gross assets minus debt) is estimated at 80% of GDP. The authorities are also committed to promoting the non-hydrocarbon and private sectors, according to the analyst. Qatar's external debt ratios have declined markedly since their peak in 1998, said the analyst. Moreover, most of the debt is associated with highly profitable export projects.
However, he added, Qatar's ratings are constrained by several factors. "Qatar's political, administrative, and legal institutions are weaker than those of most other Aa- or Aaa-rated countries, and the poor quality, scope, and timeliness of official data act as an impediment to economic analysis," said Orchard. Also, despite being relatively isolated from regional geopolitical instability, deterioration in the regional political environment could have a negative effect.
"Since the economy is highly reliant on hydrocarbon production and exports, it is exposed to potential swings in international energy prices, although the fiscal and external current accounts are less sensitive to a downturn in energy prices than those of other hydrocarbon-exporting countries," he explained.
The new constitution, which was enacted in 2005, envisions a limited form of democracy. "Elections for the national assembly have not yet been held, but municipal elections in April have heightened expectations that a date could soon be set," said Orchard.
The rating agency's report, "Qatar: 2007 Credit Analysis," is a yearly update to the markets and is not a rating action.
