Moody's on May 26 downgraded Qatar's long-term issuer and senior unsecured debt ratings to Aa3 from Aa2 and changed the outlook to stable from negative.
The downgrade primarily reflects Qatar's weakening external position and uncertainty over the sustainability of the country's growth model beyond the next few years. The stable outlook depicts the agency's view that the implementation of fiscal and economic reforms in the country, coupled with sizable reserve buffers, will help prevent further deterioration of the country's credit profile.
Qatar's total external debt reached almost 150% of GDP in 2016, up from an estimated 111% in 2015, because of a rise in commercial banks' foreign liabilities to $123 billion from around $85 billion. The level and increase in Qatar's external debt-to-GDP ratio is the highest among Aa2-Aa3-rated sovereigns, the agency said.
Uncertainties noted by the agency regarding the country's growth model included an expected peak and potential decline in population numbers from 2020 or earlier, and the envisaged reduction in public investment, meaning that private consumption as well as investment growth would slow down sharply.
Meanwhile, Qatar's long-term foreign-currency bond and deposit ceilings were also lowered to Aa3 from Aa2, and the long-term local-currency bond and deposit country risk ceilings were downgraded to Aa3 from Aa2.