Qatar’s macroeconomic indicators have improved after the pandemic-induced crisis in 2020, returning to positive economic growth, the EIU researcher said in a recent assessment.
The country’s fiscal account will return to surplus this year due to the recovery in global oil and gas prices, easing pressures on public debt. Qatar’s debt obligations are high, but its ability to fully insure them is beyond doubt, backed by large foreign exchange reserves and the assets of the Qatar Investment Authority (QIA, the sovereign wealth fund).
EIU’s sovereign risk remains rated BBB, although the underlying score improved by four points to 36, reflecting EIU’s assessment of improving macroeconomic indicators.
According to EIU, the peg of the Qatari riyal to the dollar will continue to be supported by healthy foreign exchange reserves and QIA assets. The currency risk rating remains at BB, although the underlying score has improved by two points to 42.
The rating is supported by a recovery in international hydrocarbon prices and an expected shift from deficit to current account surplus in 2021.
In its assessment of the country’s banking system, EIU said banks’ net international investment position is large but manageable. The sector is well regulated and, although net external liabilities present risks, strong prudential indicators protect banks from deterioration in asset quality resulting from the 2020 recession. The bad debt rate is low and levels profitability are moderate.
The economic structure risk rating is unchanged, at B, and the score is unchanged, at 53, EIU noted.
âQatar’s excessive dependence on hydrocarbon exports makes it vulnerable to fluctuations in international prices. The Qatar National Vision 2030 diversification program will shape policy. Qatar’s large stock of public debt weighs on the outlook, but a strong financial system is supportive, âEIU said.
In a previous update, EIU said that Qatar’s overall business environment score fell from 6.56 for the historical period (2016-20) to 7.35 for the forecast period.
This, EIU noted, helped Qatar’s world rankings improve by eight places, from 36th to 28th, although its regional ranking remains stable at third place. The most significant improvements, in terms of scores, are in the categories of infrastructure and market opportunities.
âQatar’s fairly open foreign investment regime, open trade relations with regional partners and sophisticated capital markets will remain strong aspects of its business environment. The main gaps relate to the policy towards private enterprise and competition and access to finance for small and medium-sized enterprises, âsaid the EIU.