Qatar’s fiscal deficit is expected to narrow to 1% of GDP in 2021 from an estimated 2.3% of GDP in 2020, The Economist Intelligence Unit (EIU) said in a recent update.
An expected shift from a deficit to a surplus could also be seen on the country’s current account this year, EIU said.
The end of the GCC crisis has “considerably lessened” economic risk stemming from regional disputes, EIU said and noted the sovereign risk rating has been “upgraded” to ‘BBB’, with a 7-point improvement in the underlying score.
According to EIU, Qatar's ability to “fully service” its significant debt obligations remains strong, supported by “ample” foreign reserves and the “assets” of the Qatar Investment Authority (QIA, the sovereign wealth fund).
The currency risk rating has been “upgraded” to ‘BB’, following a five-point improvement in the underlying score, underscored by a recovery in international oil prices and an expected shift from a deficit on the current account to a surplus in 2021.
“The Qatari riyal's peg to the US dollar will continue to be backed by healthy foreign reserves and QIA assets,” EIU said.
On Qatar’s banking sector, it said the risk rating remains at ‘BB’, although the underlying score has “improved” by 5 points. The rating is supported by a robust regulatory framework and solid capital and liquidity indicators.
The ratio of non-performing loans to total loans has historically been low, but is likely to rise in the short term, it said.
In the short term, the economic policy will continue focusing on addressing the fallout from the pandemic and subdued global oil prices. Qatar's stock of public debt weighs on the outlook, but a “sound” financial system is supportive.
Earlier, EIU noted the country’s real economic growth will remain stable throughout most of the long-term forecast period. However, economic diversification investment projects will “sustain robust growth” until 2030, after which growth will start to edge down.
“There remains potential for bursts of high growth if further gas export projects, beyond those planned for the mid-2020s, are approved by the government. Diversification and the expansion of the services sector, funded by the state's hydrocarbons wealth, will also provide opportunities for growth,” EIU said.
The population will continue to increase, largely through immigration, to 3.9mn in 2050. As a result, growth in real gross domestic product per head will be much slower than growth in real GDP, The Economist Intelligence Unit said.