DOHA (BLOOMBERG) - Qatar's sovereign rating was cut to AA- by Fitch Ratings, which cited little progress toward ending a Saudi Arabia-led embargo of the emirate.
Fitch lowered the Gulf state's sovereign long-term debt rating by one notch, putting it on par with Belgium and South Korea. The outlook is negative, the New York-based firm said in a statement Monday.
"International mediation efforts are still ongoing but are not showing significant progress," Fitch analysts Krisjanis Krustins and Jan Friederich said. "In our view, the negotiating positions of Qatar and the boycotting countries remain far apart."
Qatar, the world's largest exporter of liquefied natural gas, was put on a negative rating watch in June after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic ties and transport routes with the country. The four countries accuse Qatar of destabilizing the region through support of Islamist movements, a charge it denies. The Gulf nation's economy will expand this year at the slowest pace since 1995, according to economists surveyed by Bloomberg this month.
Qatar's foreign deposits fell almost 8 per cent in July, according to central bank figures, and the nation is telling its banks to go to international investors for funding instead of relying on the state, according to people familiar with the matter. Qatar is spending billions of dollars preparing to host the soccer World Cup and turn Doha, the capital, into a regional hub.
The central bank's routine stress tests show local lenders are capable of withstanding conditions resulting from the Saudi-led boycott, Governor Abdullah bin Saoud Al Thani said in statement on the regulator's website on Tuesday (Aug 29). The banking system isn't facing a liquidity crisis and there's no major risk to the industry's sustainability because banks have enough capital, he said.
"The geopolitical and the current abnormal events have had a big impact on the agency's point of view, but we believe that this classification will be modified very soon," the governor said.
Fitch estimates the pace of fiscal consolidation will slow as the government bears some of the increased cost of imports and postpones certain non-oil revenue measures in a bid to support economic activity and sentiment.
