On May 10th, 2019 S&P published an affirmation of Qatar’s credit rating at AA- with a Stable Outlook. The stable outlook reflects Qatar’s prudent fiscal management and investment-led economic growth, leading to a fiscal surplus of $US1.2bn in 2019 – the first surplus in three years – and an expected GDP growth rate of 2%.
S&P has noted Qatar’s resilience to the pressures of an air, land and sea blockade. Qatar’s economy is driven by government investment: At an estimated 45% of GDP, Qatar’s investment spending is among the highest of all the sovereigns rated by S&P.
“The stable outlook primarily reflects our view that Qatar will continue to effectively mitigate the economic and financial fallout of the boycott imposed on the country in June 2017… and that Qatar will continue to pursue prudent macroeconomic policies that support large recurrent fiscal and external surpluses over 2019-2022.”
Research Summary, S&P Ratings, May 10th, 2019
The impact of the boycott on Qatar’s external performance has been limited; most of its export earnings from natural gas come from Asian customers.
“Investments related to the government’s sizable infrastructure program will continue to support economic activity, outweighing negative sentiment related to the ongoing boycott.”
Research Summary, S&P Ratings, May 10th, 2019
(Image Source: Wall Street Journal)
AirHelp ranked Hamad International Airport in Doha number one in its latest annual rankings of 133 airports around the world, based on timeliness, service quality, and food and shop availability. AirHelp has also ranked Qatar Airways – Qatar’s flag carrier – as the best airline in the world. AirHelp is a startup dedicated to helping air passengers secure compensation for delayed, canceled, or overbooked flights. AirHelp’s superior rankings of Hamad International Airport and Qatar Airways are a testament to the dedication of the airport and airline to excellent service, reliability, and Qatari hospitality. As the 2022 World Cup nears, soccer fans around the world can look forward to being in the best hands possible during their transit.
Hamad International Airport is a young airport, having only begun construction in 2006 to replace the former Doha International Airport. The project was highly ambitious, with 60% of the site on land reclaimed from the Arabian Gulf. The first two phases of its construction were opened in 2014; its final phase is underway now, which will grow its capacity from 30 million passengers per year to 50 million per year.
The scope of the mission is as staggering as it is necessary, as the number of travelers passing through Qatar has ballooned from 5 million per year ten years ago to 25 million per year today. This will even further boost Qatar’s status as a major gateway between Africa, Asia, the Middle East, and beyond.
The 2022 World Cup is a major driver of Hamad International Airport (HIA)’s current development and expansion, as Qatar anticipates receiving 1.5 million visitors during the four-week tournament. The recently-opened Red Line metro in Qatar will connect to HIA, giving visitors easy access to the tournaments, as well as the heart of Doha and beyond.
HIA was constructed to maximally facilitate the seamless flow of travelers – and the airport design reflects an aquatic theme with waving roofs and a water droplet-shaped dome topping the minaret of the airport’s mosque.
In keeping with Qatar National Vision 2030, environmental consciousness is also at the heart of the airport’s design: the surrounding landscaping features desert-adapted plants irrigated with recycled wastewater, sunlight-reflecting material coats the passenger terminals to reduce cooling needs, and carbon dioxide sensors regulate air circulation based on the number of travelers inside at any given time.
You can read more about the airport’s and Qatar Airways’ environmental policy.
HIA works with Qatar Museums to curate a variety of local and international exhibitions for artistically curious travelers. The most visible is the colossal Lamp Bear by Urs Fischer – a 23-foot-tall teddy bear built out of bronze that weighs about 18-20 tons.
Other remarkable sculpture exhibitions include the Mesopotamia- and Abu Firnas-inspired Flying Man by Iraqi Dia Al Azzawi, Qatari Ali Hassan‘s Arabic calligraphy-inspired Desert Horse, and the intricately stunning gold Cosmos by Jean Michel Othoniel.
The airport is home to a diversity of shops from Qatar and around the world, from the Qatari Almotahajiba‘s vogue, traditional women’s wear to globally recognized luxury brands like Gucci, Rolex, and Swarovski. It hosts a variety of lounges for passengers of all travel classes and ages, which varyingly include dining, high-speed wifi, smoking rooms, showers, play areas for children, and much more. Travelers can enjoy local food and drink from Qataf Café, South Asian and Arab fusion food at AZKA, or, of course, familiar options like Burger King, Argo Tea, Illy, Starbucks, and Red Mango.
Learn more about visiting Qatar.
Public Art at Hamad International Airport
Qatar’s Ministry of Transport and Communication announced the opening of the new Doha Metro Red Line South. The Red Line South will be operational on Wednesday, May 8th.
The Doha Metro Red Line South is part of the overall Doha Metro project that is being developed by Qatar Rail. The main purpose of Doha Metro is to provide integrated railway services that are reliable and accessible to all.
In this case, the Red Line South runs from Lusail to Al Wakra, and connects Hamad International Airport with Doha. The Red Line South will create greater inter-connectivity for local communities and for tourists as well.
As of now, only 13 out of the 18 Red Line stations will be operational and open to the public.
Lastly, the completion of Doha Metro Red Line South will complement Qatar’s preparations to host the FIFA World Cup 2022 and the country’s overall progress in modernizing its transportation infrastructure.
The Doha Rail Experience
(Image Source: Mitsibushi)
On May 3rd, 2019, ten Qatari SportsTech companies received $1.5 million in committed funding and secured a soft commitment of an additional $5 million in future funding.
On May 2nd, Qatar SportsTech, in conjunction with Qatar Development Bank and powered by Startupbootcamp, celebrated the first SportsTech Demo day in MENA (Middle East and North Africa) at Khalifa Stadium.
The ten SportsTech teams showcased a variety of innovative solutions ranging from wearables and equipment, fan engagement and experience, sports medical, e-sports, sports culture, sports tourism, team performance and analytics, to venue optimization and management.
Furthermore, the ten teams established partnerships with leading names in the sports industry and with key strategic organizations in the region, such as, Qatar Airways, Supreme Committee, QFC, Al Shaqab, FC Barcelona, US Professional Tennis Association and many more.
With the support of Qatar Development Bank (QDB), the ten teams have secured $400,000 in the form of facilities and services, and received a cash payment of $20,000. All ten companies have confirmed to form legal entities in Qatar.
Koen Bosma, the program Managing Director, stated the following about the future of Qatar SportsTech: “2019 was a time of new beginnings and what a start it has been! We have only scratched the surface of our potential. I am so excited to soon be welcoming new strategic partners to be joining Qatar SporstTech and to see more initiatives like QST shaping the entrepreneurial ecosystem in Doha. Watch this space!”.
About the Program:
“Qatar Sportstech is the leading accelerator program for innovative companies in the sports industry. It is an unparalleled platform for startups to proactively scale up their business and demonstrate their product to leading corporations, leading sporting events and the ever-growing sports community.
10 Sportstech companies will be selected for this intensive 3-month program that provides one-on-one mentorship from no less than 100 industry experts, personal office space in the Aspire Zone in Doha, seed funding and direct access to a highly international network of investors and corporate partners from all corners of the sports industry.
Qatar Development Bank has joined forces with the Aspire Zone Foundation, Ministry of Economy and Commerce, Qatar Financial Centre and Startupbootcamp to fund the Qatar Sportstech Accelerator. These key partners provide expertise, exposure, APIs and unprecedented access to their network of industry professionals from around the world.”‘
– In 2017, Qatar Petroleum (QP) announced plans to raise LNG production capacity from 77 million tonnes to 110 million tonnes per year.
– In April 2017, QP declared a new expansion/development project of the North Field.
– On November 14th, 2018, the IMF released the findings of its visit to Qatar. The IMF stated the following: “The near- to- medium-term outlook for the Qatari economy is benefiting from increased oil prices and prudent macroeconomic policies. We anticipate overall real GDP growth of 3.1 percent in 2019, with still robust non-hydrocarbon growth and recovery in oil and gas production. Over the course of 2020-2023, real GDP growth of about 2.7 percent annually is projected, underpinned by still significant public infrastructure spending, expansion of liquid natural gas production, and the hosting of 2022 World Cup”.
– QP selected Japan’s Chiyoda Corp for the front-end engineering and design of the onshore facilities of the North Field expansion project. Furthermore, it awarded McDermott a contract for the offshore engineering work.
– On April 15th, 2019, QP issued a tender package for the engineering procurement and construction (EPC) of four liquified natural gas (LNG) mega-trains of its North Field Expansion (NFE) project. The completion of the NFE will boost Qatar’s GDP growth.
North Field Expansion (NFE) project
On April 15th, 2019, Qatar and McDermott International, a Houston, Texas, based multinational engineering, procurement, construction and installation company, signed a contract worth $50 to $250 million.
The contract stipulates that McDermott will provide engineering, procurement, construction and installation (EPCI) of four liquified natural gas (LNG) mega-trains as part of country’s North Field Expansion objective, which will increase Qatar’s LNG production from 77mm tonnes per annum (Mta) to 110mta by 2024. The EPCI of the four mega-LNG trains will be equipped with gas and liquid treating facilities, ethane and liquified petroleum gas production and fractionation, a helium plant, and utilities infrastructure to support the processing units.
McDermott International has planned to deploy its project management and engineering teams in Doha in order to monitor and fulfill the terms of the contract. Works are expected to begin immediately. Following the tender package, Qatar’s Minister of Energy, HE Saad Sherida al-Kaabi, stated the following: “I am pleased to announce that further contract awards related to the project will be announced shortly”. This illustrates Qatar’s commitment and plans to further expand extraction and production capacity of the North Field.
The North Field, which is located off the north-east shore of the Qatar peninsula, is one of the largest non-associated natural gas fields in the world. It has been estimated that the North Field hosts more than 900 trillion standard feet (tscf) of reserves. Previously, Qatar awarded a different contract to McDermott for the fabrication and installation of eight NFE offshore jackets, and the early site works for the onshore project to the joint venture between Consolidated Contractors Company (CCC) and Teyseer Trading and Contracting Company. This project was entrusted to Qatargas, a subsidiary of QP.
Cover Image Source: Reuters (REUTERS/Naseem Zeitoon/File Photo)
– The Umm Al Houl Power Plant is an unprecedented water security and energy project located 10 miles south of Doha, Qatar. Construction on the water desalination and power generation plant began in 2015, and the plant became fully operational in March 2018.
– The project aims to bolster Qatar’s water and energy efficiency, attract foreign investment, and spur economic development; key objectives of Qatar’s Vision 2030.
– Umm Al Houl Power Plant is one of the largest water desalination and power generation plants in the region. The plant generates 2,520 megawatt of power and 136.5 million gallons of drinking water per day, which meets 30% of Qatar’s need for power and 40% of its desalinated water  .
– Qatar Electricity and Water Company (QEWC) owns 60% of the Umm Al Houl Power Plant, Qatar Petroleum and Qatar Foundation own 5% each, and Mitsubishi-Tokyo Electric Power Company (TEPCO) owns the remaining 30% as a consortium .
As a small state with limited access to natural freshwater resources, Qatar’s water and energy security is a vital component of its national security. Qatar’s population of 2.6 million people rely on an integrated water and power generation scheme to ensure access to drinking water and electricity. As Qatar’s population grows at an annual rate of 2.7%, Qatar’s desalinization capacity will receive a manifold boost by the completion of Umm Al Houl Power Plant.
The $4.6 billion Water Security Mega Reservoirs Project that was completed in 2018 will also augment Qatar’s water security by acting as a strategic buffer in the event of disruption to desalinization capacity.
Now one of the Gulf region’s largest water desalinization and electricity power plants, Umm Al Houl Power Plant is Capable of generating 2,520 megawatt of power and 136.5 million gallons of drinking water per day, satisfying 30% of Qatar’s need for power and 40% of its need for desalinated water.
Construction of the plant began in 2015, and the plant went online in March 2018. The plant was built by Qatar Electricity and Water Company, Mitsubishi Corporation- Tokyo Electric Power Company (TEPCO) operating as a consortium, Qatar Petroleum and Qatar Foundation.
Umm Al Houl Power Plant is a key part of Qatar’s National Vision 2030. The project supports strategic goals of creating infrastructure to support economic development. It aims to develop the electricity and water utility sectors and increase foreign and local investments in both. The project site was chosen based on the availability of infrastructure, particularly water and gas pipelines and the salinity of the water near it.
Strategic Water Reserve:
The Water Security Mega Reservoirs Project, which is the largest of its kind in the world, has a total water storage capacity of about 1,500 million gallons, a 155% increase from the current water storage capacity of 900 million gallons . The current phase of the project will ensure water security until at least 2026, followed by future stages that will meet water demand after 2036 by adding additional reservoirs. In its current phase of completion, the project extends the strategic water stock in Qatar’s water network from 2 to 7 days which will increase the capacity of water storage by 10 times.
Umm Al Houl Power Plant Operations
Umm Al Houl Power Plant generates electricity utilizing combined cycle gas turbines (CCGT) and desalinizes water utilizing both reverse osmosis (RO) technology and multiple stage flash (MSF) technology (See Figure 3 for a comparison of water production technologies).
In 2014, Qatar General Electricity & Water Authority identified that Qatar faced a potential shortfall of power and water production in the short to medium term, 2016 for water and 2017 for power. This projection drove urgent demand for Umm Al Houl Power Plant.
The plant now produces 2,520 Mega Watts of electricity and 136 million gallons of water per day. This is a 22% increase in the current electricity output and a 25% increase in water production.
Careful attention was given to environmental concerns during the planning and construction phases of the project. Extensive marine surveys undertaken at the site considered water quality, in-situ habitats and flora/fauna and sediment quality. All laboratory testing was undertaken at a nationally accredited laboratory using internationally standardized testing methodologies .
Umm Al Houl Power Plant marks the first instance of large-scale reverse osmosis (RO) to desalinate water for drinking in Qatar. RO technology utilizes methods that are proven to emit substantially less CO2 into the atmosphere. The system uses minimal power during the filtration process, making it a green system that conserves energy and the surrounding environment .
 Peninsula Qatar: “Amir inaugurates Water Security Mega Reservoirs Project”
Qatar’s Minister of Finance – Mr. Ali Shareef Al-Emadi – is leading Qatar’s delegation to the Spring Meetings of the World Bank Group and the International Monetary Fund from April 12-14. The Qatari delegation’s participation in the Spring Meetings is set against a backdrop of Qatar’s strong 2019 growth forecast of 2.6% and fiscal performance that will see the country post a surplus this year. This is despite the global economy entering “synchronized slowdown” according to the latest update of a tracking index compiled by the Brookings Institution and the Financial Times. The IMF also cut its global growth forecast from 3.5% to 3.3% for 2019. Investor confidence in Qatar’s economy was reinforced in March 2019, with a $12 billion issuance that was well oversubscribed by investors globally.
Qatar Economic Update:
– Qatar is forecast to post a fiscal surplus of $1.2 billion in 2019 — the first surplus in 4 years — supported mainly by higher hydrocarbon prices translating into stronger budgetary revenues.
– Qatar’s macroeconomic resilience allows it to enjoy high investment-grade credit ratings from the three international credit ratings, Moody’s, S&P and Fitch. Despite the uncertainty created by recent geopolitical conditions, all rating agencies have rated Qatar’s economic outlook as “stable”.
– The non-oil and gas sector account for 64% of the overall economy in 2018, with construction and manufacturing driving GDP growth.
– Qatar’s economy grew by 2.7% in 2018, outperforming the GCC average of 2.4%.
– Non-hydrocarbon exports have grown to represent a more material element of Qatar’s export mix, currently at 13.9% of total exports. The government’s diversification agenda will continue to increase the non-hydrocarbon contribution to economic activity.
– Qatar’s crude oil prices increased by 32.9 % for the first three quarters of 2018 to average US$71.5/barrel compared to an average of US$53.8/barrel in 2017.
Qatar Key Economic Facts:
Population (December 2018)
Long-Term Credit Ratings1
Moody’s Aa3 Stable
S&P AA- Stable
Fitch AA- Stable
US$ 166.9bn (2017)
US$ 142.5bn (9-Month 2018)
Nominal GDP per Capita
US$ 64,705 (2017)
US$ 1.2bn Surplus (Forecast 2019)
50.2% (September 2018)
US$ 53bn Surplus (2018)
- Qatar is in the same rating horizon as the likes of Belgium, Taiwan, Macau and the Cayman Islands. AAA rated countries include (not limited to) Australia, Canada, Denmark, Germany, New Zealand, Singapore and the U.S.
 “Global economy entering “synchronised slowdown” Financial Times, April 7, 2019
The Qatar-America Institute (QAI) has launched a new initiative, the Expert Voices Series. The initiative is envisioned as a medium for encouraging broader and more diverse conversations between Qatari experts and/or experts on Qatar with U.S.-based leaders in business, academia and politics.
In an effort to diversify outreach beyond the traditional East Coast hubs of Washington, D.C. and New York, QAI sought to initiate new channels of engagement with the key West Coast hubs of San Francisco and Los Angeles. With a population of 39.5 million and a GDP of $2.7 trillion – the fifth largest economy in the world – California (CA) was QAI’s natural choice for a first foray to the West Coast. The state boasts some of the world’s premier academic institutions and science labs, as well as America’s motion picture industry (Hollywood).
Silicon Valley in California’s Bay Area is the global capital for hi-tech innovation and entrepreneurship; the co-location of a critical mass of venture capital investors and a talent pool of unparalleled depth and quality has produced some of the world’s most valuable companies. California’s industrial origins in defense and aerospace remain integral to the state’s research and development (R&D) nexus and economic export composition.
Dr. Khalid Al-Ali – Qatari Tech Entrepreneur and Former NASA Specialist
The first participant in QAI’s Expert Voices Series was Dr. Khalid Al-Ali, a Qatari technology entrepreneur and Co-Founder and Executive Chairman of Senseta, a Silicon Valley-based data analytics firm.
In the field of aeronautics and exploration technology, Dr. Al-Ali spent 10 years in NASA’s Ames Research Center and Jet Propulsion Laboratories. Dr. Al-Ali was also the CEO of the Qatar Science and Technology Park (QSTP), Qatar’s premier business “free zone” dedicated to the development of market-ready tech products
Having earned his PhD at UC Berkeley and worked at NASA and DARPA-administered labs, Dr. Al-Ali has made California his second home both professionally and personally. He is uniquely well positioned to provide a nuanced outlook of promising and fertile areas of collaboration between Qatari entities and the State of California.
California Engagement Snapshot
QAI hosted Dr. Al-Ali in Northern California, where he featured as a speaker on a panel, “Technology Trends in Emerging Markets,” at Stanford University’s inaugural MENA Forum. As the CEO of tech firm, which has created knowledge-intensive jobs in both Silicon Valley and Doha, Dr. Al-Ali spoke about Qatar’s commitment to increasing its GDP contribution to R&D that forms the basis of commercially successful tech-enabled products.
On the panel, Dr. Al-Ali spoke about his experience leading the complex negotiations that brought two of the seven U.S. universities that have established full degree-granting campuses in Doha’s Education City. With his appointment as the first CEO of QSTP, he spoke of the vision to “capture the intellectual property from the academic institutions and providing a finance bridge from QSTP to create value from knowledge.” Dr. Al-Ali spoke of his leadership role on national steering committees that have shaped Qatar’s technology policy and articulated Qatar’s vision of integrating its industry with the research and higher education infrastructure that it has been investing massive resources to develop.
On the sidelines of the Stanford MENA Forum, Dr. Al-Ali held meetings with Research Fellows at the Hoover Institution, a leading American think tank, to discuss potential partnerships between Hoover Fellows and research institutes in Qatar, such as the Qatar Computing Research Institute and the Qatari Energy and Environment Institute.
Similar consultations were held with Distinguished Fellows at the Freeman Spogli Institute for International Affairs, with a specific focus on food security and energy markets and with the Stanford’s Program on Energy and Sustainable Development.
UCLA’s Center for Middle East Development (CMED) hosted QAI and Dr. Al-Ali at the university’s Faculty Club for discussions that will reinforce UCLA’s already deep ties with Qatar. CMED is UCLA’s dedicated center for Middle East expertise and, for many years, has partnered with Qatar’s Ministry of Foreign Affairs to host an annual conference in Qatar under the banner of “Enriching the Economic Future of the Middle East.”
RAND Corporation Santa Monica
At the RAND Corporation’s Santa Monica headquarters, Dr. Al-Ali gave remarks on “Qatar’s Economic Diversification and Tech/Innovation Policy” to a select group of researchers, followed by an engaging Q&A session under Chatham House rules. He highlighted the nexus approach of linking Qatar’s universities with government-backed funding mechanisms, such as Qatar Development Bank (QDB) and QSTP. He emphasized that enabling the private sector through access to credit and business incubators will facilitate the creation of small and medium enterprises (SMEs) that will help Qatar diversify its economy away from hydrocarbons.
Though the RAND Corporation no longer maintains an office in Doha, it remains an important strategic partner to many Qatari institutions who rely on RAND for research and advisory support.
The Larta Institute defines itself as providing a “mesh network” of mentorship resources, expertise, funding and connections to patient capital. In that sense, Larta is an Institute and not in the mold of traditional Bay Area “accelerators” that tend to be a source of one-time funding, office space for a limited time, and a scattered feedback loop.
Larta recognizes the fiercely competitive space of emerging technology start-ups and instead seeks to support nascent tech companies in every step of their lab to market transition. This starts with pairing companies with Principal Advisors who are experienced practitioners in both academia and industry. Larta is organized around the four pillars of Feed, Fuel, Heal and Innovation, with long-standing partnerships with the federal research funding arms of the National Institute of Health, Department of Energy and United States Department of Agriculture.
QAI and Dr. Ali had a very positive meeting with the Larta leadership. QAI expressed enthusiasm for converging some of Larta’s internationally renowned experience with Qatar’s efforts to cultivate its own organic “mesh network” of business enablers. This will help advance the Qatar National Vision 2030, which prioritizes economic diversification and human capital development.
The Pacific Council on International Policy
The Pacific Council is the West Coast’s premier member-based public diplomacy institute. It has hosted sitting U.S. Secretaries of State, Members of the U.S. Senate and House of Representatives, former presidents, and the list could go on.
The Pacific Council hosted a lunch in their LA headquarters in honor of Dr. Khalid Al-Ali. The lunch was well attended by Pacific Council members who hail from diverse industries: financial services, aviation, law enforcement, defense, academia and literature.
Dr. Al-Ali offered some remarks on Qatar’s journey from seeking partners in the 1960s to finance and provide the technology for a world-leading LNG industry, to its current investment-led boom in human capital development and a sovereign wealth fund with a global and diversified portfolio of assets. Under Chatham House rules, Dr. Al-Ali fielded many thought-provoking questions about Qatar’s role in international affairs, its sporting ambitions and engagement with the U.S.
On March 10, 2019, Qatar’s Minister of Commerce and Industry publicly stated that the country’s trade surplus reached $52 billion in 2018.
This is a noteworthy economic achievement despite the economic and diplomatic blockade enacted by Qatar’s neighbors. This will bolster Qatar’s international standing and economic appeal as a safe and lucrative destination for investors. In essence, Qatar is telling the world that business is carrying on as usual.
When economic and diplomatic ties were severed between Qatar and the coalition of countries that implemented the blockade measures, which cut the country’s access to an estimated of 60% of imported goods, Qatar expanded its trade relations with existing partners. A concrete example would be with Pakistan. Speaking at a forum on Qatar-Pakistan trade, Minister Ali Al Kuwari declared that trade between the two countries grew over 230% in 2019 to $2.6 billion. Trade with Iran and Turkey has also increased; furthermore, Doha is also seeking partnerships with Western countries, including an open-skies agreement with the EU.
Additionally, Qatar’s Financial Center Authority CEO, Mohamed Al Jaida also spoke at the forum citing Qatar’s efforts to diversify the economy and to heavily invest in the New Emerging Belt Initiative (NEBI) targeting investments in countries like Oman, India, Turkey, and Pakistan. He went to state that Pakistan was the 13th largest trading partner to Qatar and that a $16 billion trade deal was signed to deliver LNG to Pakistan until 2030.
Most notably, the IMF noted on May 18, 2018, that Qatar’s growth performance has remained resilient to the external shocks caused by blockade. However, Qatar’s energy sector, specifically, its LNG exports, have helped the country in alleviating the economic pressures stemming from the blockade. In fact, IMF confidently estimated a 3.1% growth in 2019 for Qatar.
Introduction: Moody’s is one of three major international credit rating agencies (CRAs) – the other two being S&P and Fitch – that evaluate the Sate of Qatar’s (SoQ) sovereign creditworthiness. These ratings are important for any government’s debt management exercises as they affect the country’s ability to access financing – for fiscal deficits and other external funding needs – through debt capital markets (DCM).
Government-related entities (GREs), such as Ooredoo (telecommunications) and Qatar National Bank (QNB), also benefit from the strength of the SoQ’s credit rating as private creditors use the sovereign’s borrowing spreads as a pricing benchmark for GREs looking to sell bonds.
In other words, rating upgrades or downgrades can lead to materially higher or lower costs of funding. On large multi-billion-dollar transactions – such as the jumbo bond issued by the SoQ in April 2018 – even marginally higher spreads can translate into accrued interest payments in the millions of dollars.
Moody’s uses the following criteria to assess any sovereign issuer’s ability to service its debt:
– Economic Strength – Wealth, size, diversification, and long-term potential;
– Institutional Strength – Governance, quality of institutions, and policy predictability;
– Fiscal Strength – Ability to deploy resources to face current and expected liabilities;
– Susceptibility to Event Risk – Risk of sudden risk migration
On 13 July 2018, Moody’s changed the outlook on Qatar’s sovereign issuer rating to stable from negative, citing that “Qatar can withstand the economic, financial and diplomatic boycott by the three neighboring Gulf Cooperation Council (GCC) countries and Egypt in its current form for an extended period of time without a material deterioration in its credit profile.”
Key Highlights of Credit Opinion:
– Current SoQ rating: Aa3 (outlook: stable)
– Continued strength of fundamental credit metrics, underpinned by:
– Vast hydrocarbon reserves, fueling high export capacity and a dominant global LNG market share (28%);
– Exceptionally high per-capita incomes – with a nominal GDP per capita of $69,933 in 2018 (forecast) – allowing for significant shock-absorption capacity and reform flexibility for the government.
– Continued progress in the government’s debt reduction (de-leveraging) program is credit-positive. Government debt to GDP (debt/GDP%) has declined from 49% in 2017 to 42% in 2018 and is expected to fall further to 36% in 2019.
– The stable outlook is consistent with Moody’s expectation of a declining government debt burden under Moody’s baseline oil price assumption of $75/barrel in 2019 and $65/barrel in 2020.
– What could lead to a rating upgrade? Coupled with the government’s de-leveraging strategy, a sustained re-building of foreign exchange (FX) reserves – which were negatively impacted by the blockade – would prompt Moody’s to consider upgrading the rating. According to Qatar Central Bank (QCB) data, FX reserves have increased from $14.8 bn in December 2017 to $29.4 billion in November 2018, an increase of 99%.
– During the course of 2019, it will be worth monitoring how Moody’s rating sensitivity will correlate with Qatari policymakers’ steps to build up QCB reserves, strengthen its external position and continue to successfully manage the status quo of the blockade.
– Institutional Strength: The Credit Opinion states that “The government’s responses to the GCC boycott imposed in June 2017 demonstrate policy effectiveness and coordination between public sector entities, as well as a strong institutional capacity to manage crises.”
– Budget 2019 Highlights: The government is targeting a small budget surplus of QAR4.3 billion (0.6% of projected 2019 GDP), compared to a budgeted deficit of QAR28.1 billion (4% of estimated GDP) for 2018. This will be the first fiscal surplus in 3 years, reflecting higher oil prices. (Brent crude average in 2018 was $72/barrel, compared with $54/barrel in 2017).
– Major capital projects – public investments in infrastructure for the World Cup and the economy at large – will continue to account for the lion’s share (43%) of government expenditure. This flows both from the need to complete requirements for hosting the 2022 FIFA World Cup, and from the Qatar National Vision 2030, which prioritizes investments in the building blocks of a modern competitive economy.
Qatar’s OPEC Exit: Moody’s does not expect Qatar’s decision “to have any credit implications for the sovereign. Qatar’s reliance on LNG means that OPEC’s decisions on oil supply and their implications for oil prices will continue to have an indirect impact on Qatar’s government and export revenue. For Qatar to no longer be part of these decisions will not change the sensitivity of its credit metrics to oil price fluctuations and will not have material impact on the country’s hydrocarbon production and growth dynamics.”
 Moody’s, “Moody’s changes Qatar’s rating outlook to stable, affirms Aa3 rating,” 13 July, 2018
 Moody’s, Government of Qatar: Financials
 Moody’s Credit Opinion, “Regular Update: Government of Qatar”, pp.2
 QCB Monthly Monetary Bulletin – November 2018 – Table 11, “Total Official Reserves”
 Ibid., pp. 3
 Ministry of Finance – Qatar
 Moody’s Credit Opinion, “Regular Update: Government of Qatar”, pp.6