How long Qatar has to wait for its revised sovereign rating?

Qatar with a hydrocarbon-dominated economy will have to wait for another two years to see whether its sovereign rating will be revised, according to global credit rating agency Standard & Poor’s (S&P).

“Qatar now has ‘AA’ stable rating. The stable outlook means we do not expect the rating to change for the next two years unless there are unspecified circumstances,” S&P senior director (sovereign ratings) Christian Esters told Gulf Times in an exclusive interview.

Former Finance Minister Yousef Hussein Kamal had said Qatar rightfully deserved a place in the ‘AAA’ galaxy due to the country’s inherent economic strengths.

However, S&P is of the view that Qatar’s limited monetary flexibility and banks’ increasing dependence on external funding stand in the way of raising the rating from ‘AA’, the third-highest investment grade.

Terming that “AA rating is one of the highest ratings that it gives globally and the rating per se is a very strong rating; Esters said sovereign rating does not look only at the macroeconomic indicators but it also at other qualitative aspects such as diversification and vulnerability to shocks.

“We always take a medium-term perspective and we don’t upgrade or downgrade every now and then, based on the economic numbers,” he said, adding S&P would expect diversification to be increasing.

“If I look at the economic statistics alone, then Qatar should be a good candidate for AAA rating,” Standard Chartered global head for macro research (global markets) Marios Maratheftis had told Gulf Times in an earlier interview.

On the growth prospects, Esters said the rating agency would expect Qatar to grow 5% this year mainly on the back of a 10% acceleration in the non-hydrocarbon sector.

The higher growth rates of previous years due to investments in the hydrocarbon segment (base effect) and the moratorium on the North Field have muted the growth in the country but “still 5% is a decent growth”, he said.

According to the Ministry of Development Planning and Statistics, Qatar is expected to post “solid” economic growth in 2014 and 2015, driven by the non-hydrocarbon sector, accelerated investment spending and population growth.

On inflation, S&P said it would expect it to be 4% for this year although it was not a major concern.

The Ministry of Development Planning and Statistics had said domestic inflationary pressures are expected to heighten over the rest of 2014 and in 2015 on strong domestic demand.

Quoting the International Monetary Fund on the possibility of overheating in the domestic economy, Esters said there is a likelihood of demand-pull inflation.

On the limited flexibility of the Qatar Central Bank to set the country’s monetary policies, he attributed it to the domestic currency’s fixed exchange parity with the dollar.

Brent oil falls as glut outweighs Mideast turmoil; US crude up

Brent crude oil inched lower yesterday as ample global supplies outweighed tensions in the Middle East, while US oil bounced higher after four sessions of losses.

For Brent, higher output from Libya and Iraq overshadowed the start of US-led air strikes against Islamist groups in Syria. US crude rallied after earlier falling close to 17-month lows.

Crude oil prices on both sides of the Atlantic have fallen steeply since June as geopolitical fears waned and strong supply, including from the US, swamped markets.

Brent for November delivery fell 7¢ to $96.90 a barrel by 2.00pm EDT (1800 GMT) after climbing as high as $97.59 a barrel in early trading. It hit a two-year low of $96.21 last week.

Brent is down by more than 5% this month, with the oil benchmark on track for a third straight monthly fall.

US crude rose 70¢ to $91.57 a barrel, rebounding from a session low of $90.58, which was its weakest since September 11. Its discount to Brent narrowed to around $5.25 a barrel.

Libyan oil output has risen to 800,000 bpd, with the key El Sharara oilfield restarting – Source: Gulf Times