Moody’s downgrades Qatar’s rating outlook on Gulf crisis

Moody’s Investors Service has changed the outlook on Qatar’s rating to negative from stable, due to economic and financial risks arising from the country’s ongoing diplomatic row with fellow Arab nations, it said in a report on Wednesday.

Last month, Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut diplomatic ties with Qatar, accusing the gas-rich country of supporting terrorism.

The group enacted a series of measures, including closing land, sea, and air links, and expelling Qatari citizens from their nations.

On June 23, the Kingdom and its allies issued a 13-point ultimatum to Qatar, delivered by Kuwait, which is helping mediate the crisis. The list included demands to shut down the Al Jazeera network, curb diplomatic ties with Iran, and end Turkey’s military presence in Qatar. 

“Public exchanges between the various parties in recent weeks and previous periods of heightened tensions between Qatar and other GCC countries suggest that a quick resolution is unlikely and that the stalemate may continue for some time,” Moody’s said.

In the rating agency’s view, the current uncertainty is increasingly likely to extend into 2018, carrying the risk that Qatar’s sovereign credit fundamentals could be negatively affected.

“Absent a swift resolution, economic activity will likely be hampered by the measures imposed so far. While Qatar's hydrocarbon exports are not affected at this stage, there have been reports of disruptions to certain non-hydrocarbon exports and a forced shutdown of helium production,” the report said.

Moreover, the termination of direct flights between Qatar and coalition countries will affect sectors like consulting and tourism, as well as the profitability of corporates, including government-owned or government-related entities like Qatar Airways.

A prolonged period of uncertainty could weigh on business and foreign investor sentiment, and also hamper the Qatar’s long-term economic diversification plans, the ratings agency added.

Meanwhile, Moody’s affirmed Qatar’s long-term issuer and senior unsecured debt ratings at Aa3, driven by a number of credit strengths embedded in Qatar's credit profile.

The rating affirmation also reflects Moody's view that the Qatari government’s sizable net asset position and high levels of wealth will continue to provide significant support to the sovereign credit profile for the time being.