Qatar's (Aa2 stable) robust balance sheet and vast hydrocarbon reserves underpin the sovereign's credit profile, according to Moody's Investors Service. The rating agency notes that under a downside scenario a prolonged period of low oil prices would impact natural gas prices and erode the government's fiscal position, but Qatar's prudent budgeting and a relatively low debt burden somewhat mitigate these risks.
Moody’s notes that Qatar's non-hydrocarbon sector has been the primary driver of growth in recent years, propelled by public spending related to the ongoing infrastructure push ahead of the 2022 FIFA World Cup and in line with Qatar's long-term development strategy.
Despite the government's large step-up in spending, Qatar's fiscal breakeven oil price remains amongst the lowest in the Gulf Cooperation Council (GCC), partly attributable to prudent budgeting. Hydrocarbon receipts, which generated about 86% of the government's revenues in 2013, have been a major driver of Qatar running fiscal surpluses averaging 9.0% of GDP since 2000.
At the same time, the government's large net international creditor position provides a considerable cushion to absorb oil price shocks which could stem from the liquefied natural gas market having traditionally utilised oil-linked pricing, Moody's said. The rating agency said it is difficult to directly translate the fall in oil prices to a cash flow impact on Qatar Petroleum (Aa2 stable) – and ultimately to the government – because a sizable portion of its contracts are long-term in nature.
Moody's report notes that non-financial public enterprises' large debt burden poses contingent risks to the government's balance sheet, but that the health of the sector – as implied by the continued transfers to the government in the form of investment income – moderates risks. Qatar's general government debt climbed to 28.7% in 2013 from a low of around 8% of GDP in 2007.
Qatar's rating also shares a moderate degree of geopolitical risk with the other GCC members, arising from the persistence of regional instability. In addition, inflation volatility – while much improved recently – and data transparency continue to constrain the rating.