Fitch Ratings recently affirmed Qatar’s AA credit rating with a stable outlook amid expectations that additional gas production will strengthen public finances and a flexible public finance structure.
An AA rating symbolizes expectations of very low default risk. It indicates a very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. The ‘AA’ rating also reflects one of the world’s highest GDP per capita.
“We forecast Qatar’s general government budget surplus at 3.9 percent of GDP in 2025, including our estimates of investment income on Qatar Investment Authority (QIA) external assets (0.9% without investment income in 2025),” stated Fitch.
Oil prices to moderate in 2025
The agency also expects oil and gas revenue to drop under its assumption that the Brent oil price will average $70/bl in 2025. It also expects the budget surplus to narrow further in 2026 at 3.3 percent due to lower hydrocarbon prices and a moderate rise in current spending.
Therefore, Qatar’s rating weaknesses include heavy hydrocarbon dependence and below-average scores on some measures of governance, higher government debt/GDP than oil-dependent highly-rated peers, and substantial contingent liabilities.
Amid the expected decline in oil prices, Qatar Energy (QE) plans to expand liquefied natural gas (LNG) production capacity from 77 million tons per year (mtpa) to 110 mtpa in 2026, 126 mtpa by end-2027 and has announced further expansion to 142 mtpa by end-2030.
Fitch expects Qatar Energy to cover $12.5 billion of core project costs out of its 2021 bond issuance and a similar amount from its cash flow, spread until 2028, in addition to contributions by partners.
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Qatar’s debt/GDP to fall to 43 percent of GDP by 2027
Fitch also expects Qatar’s debt/GDP to fall to about 43 percent of GDP by 2027 from 49 percent in 2024 and a peak of 85 percent in 2020.
“This reflects our expectation that the government will refinance most upcoming external market debt maturities and pay down external loans with moderate budget surplus excluding QIA investment income. The subsequent debt path will depend on how the government chooses to deploy its fiscal surpluses,” added the report.
The rating agency estimates that Qatar’s sovereign net foreign assets (SNFA)/GDP rose to 187 percent or $398 billion in 2024 from 163 percent in 2023. This reflects the drop in nominal GDP and a sharp rise in the QIA’s estimated assets.
“We estimate that Qatar’s economy became a net external creditor at 22 percent of GDP at end-2024. This position will continue to strengthen with lower borrowing and more capital exports. Qatar had been a net external debtor since 2018 in contrast to ‘AA’ rated peers and in particular highly-rated GCC hydrocarbon exporters,” added Fitch.
