Rating upgrades may be as rare as hens’ teeth these days, but Standard & Poor’s award of a double-A long-term grade to Qatar today should come as no surprise. The country is stinking rich, even by the standards of the Gulf.
Soaring oil and gas sales will bring over $76bn into the finance ministry’s coffers this year, and expand the country’s economy by almost a fifth this year, according to the International Monetary Fund. This has propelled Qataris to the top of the table of the world’s wealthiest people, and impressed rating agencies, economists and bankers alike:
“The upgrade is based on the government’s strengthening fiscal and external balance sheets, with strong growth prospects spurred by new large liquefied natural gas (LNG) projects in 2010-2012,” said Standard & Poor’s credit analyst Luc Marchand.
It wasn’t always thus. When the small, sparsely populated Arab peninsula discovered a gargantuan natural gas field off its northern shores in the late 1990s, Qatar was almost bankrupt due to depressed oil prices.
However, the new emir, Sheikh Hamad bin Khalifa al-Thani – who had toppled his father in a bloodless coup in 1995 – made a calculated bet and borrowed heavily from banks and capital markets to build the world’s largest liquefied natural gas industry.
That bet has now resoundingly paid off, and the resulting financial and economic windfall has almost completely insulated the country from the financial crisis, S&P noted.
In our opinion, Qatar’s economy is weathering the global downturn well, with deflationary pressures and financial sector problems contained by the economic policy flexibility generated by new gas projects. Qatar is projected to stand among the fastest growing economies in 2010. We expect real GDP per capita to expand by close to 11% in 2010, thanks to investments in the LNG industry, which will raise production to 78 million tons per year by 2012 (from 37 million tons in 2009) and boost export receipts.
The rating agency still noted a few negative factors weighing on Qatar:
The ratings are constrained by still-nascent public institutions, limited transparency particularly with respect to government assets, and geopolitical risks faced by all sovereigns in the region.
Nonetheless, international investment bankers swoon over the amount of wealth Qatar will generate in the future, and how much of it will have to be recycled into overseas investments due to the limited size of the country. Today, Sainsbury, Credit Suisse, Harrods and Canary Wharf; tomorrow, the world?
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