Fitch Ratings lifted Qatar's outlook to stable from negative and affirmed its AA- long-term foreign-currency issuer default rating, citing the country's resilience amid diplomatic crisis with the UAE, Saudi Arabia, Bahrain and Egypt.
The four Arab countries in June 2017 cut ties with Qatar due to the country's alleged ties to terrorism, and issued a 13-point list of demands, including reducing ties with Iran and closing broadcaster Al Jazeera, which Qatar rejected.
Fitch said public sector liquidity injections have stabilized the banking sector and curbed the outflow of non-resident funding. Around $10 billion in non-resident funding has flowed back into the banking system since November 2017, after falling by $30 billion in June-October 2017, mainly due to withdrawals of deposits by Saudi Arabia and UAE-based clients.
The rating agency said the country's fiscal deficit narrowed to 2.8% of GDP in 2017 from 6.3% of GDP in the previous year. "We expect the government budget to be balanced in 2018 and to post a surplus of 2.9% of GDP in 2019 as higher oil prices seep through to public finances, excise tax and VAT are implemented in 2019 and growth in current spending is restrained," Fitch said.
Fitch also highlighted Qatar's robust economy, with the real GDP expanding by 1.6% in 2017, and the receding tail risks of military confrontation or a blockade hitting Qatar's gas exports.
"Attempts by the [four countries] to force companies or countries to pick sides in the dispute have not gained much traction, beyond the decisions by some banks to scale back their activities in Qatar," the rating agency said.
