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Financial News: Fitch Downgrades Qatar Rating To 'AA-'

Fitch Downgrades Qatar Rating To 'AA-'

08/28/2017 - 08:02:00 (RTTNews)

(RTTNews) - Fitch Ratings downgraded Qatar's sovereign credit rating on Monday and removed them from negative watch, as it believes that the standoff between the country and some of its neighbors are unlikely to resolve soon.

The middle-east country's Long-Term Issuer Default Ratings were lowered to 'AA-' from 'AA' and they were removed from Rating Watch Negative, where they were placed on June 12. The outlooks are 'negative', Fitch said.

Qatar's diplomatic and logistical isolation by some of its neighbors led by Saudi Arabia and the UAE continue and their land, air and sea borders with the country remain mostly closed.

No significant progress has been made in international mediation efforts, Fitch noted, adding that the negotiating positions of Qatar and the boycotting countries remain far apart.

"The risk of further escalation remains, although it may be mitigated by Qatar's network of alliances and its importance in global LNG markets, where it accounted for 30 percent of supply in 2016," the rating agency said in a statement.

"At the same time, the full financial and economic impact of the embargo is uncertain and could prove to be larger than we currently expect."

Fitch expects Qatar's GDP growth to slow to 2.0 percent this year and 1.3 percent in 2018-2019, from 2.2 percent in 2016. The dispute adds to the challenges facing Qatar's development programme and weighs on its growth outlook, the agency added.

Meanwhile, Fitch expects the government's fiscal deficit to narrow to 3.2 percent of GDP this year from 4.9 percent of GDP in 2016 as an up-tick in oil prices and restraint in public sector pay offset higher spending on goods and services, transfers and development projects, with total spending 10 percent above budgeted amounts.

The rating agency said that a failure to reduce fiscal deficits or a materialization of large contingent liabilities and further deterioration in the external balance sheet, partly due to continued outflows of non-resident funding could attract negative rating action on Qatar.

Further escalation of measures against Qatar is also a main factor, it added.

The negative outlook suggest that developments with a high likelihood of leading to an upgrade are unlikely now, Fitch said.

A day earlier, rating agency Standard & Poor's affirmed the negative outlook on Qatar's rating, saying that economic boycott could lead to slower growth. The agency rates the country at 'AA-', after a downgrade in June.

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