London: Fitch Ratings has affirmed Qatar’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘AA’ with a Stable Outlook. The Country Ceiling has been affirmed at ‘AA+’ and the Short-term foreign currency IDR at ‘F1+’.

Fitch says the ‘AA’ rating reflects Qatar’s very strong net external sovereign assets and current efforts to address the impact of lower oil prices on the fiscal balance. It also factors in the dependence on hydrocarbons and a weak but improving weak institutional framework.

The agency says Qatar’s public finances have been severely hit by the decline in oil prices, with hydrocarbon revenue accounting for 90 per cent of its fiscal revenue in 2014. It estimates a 29% drop in revenue in 2015 due to falling oil prices.

However, it notes Qatari authorities had already scaled down an ambitious medium-term infrastructure investment programme and have started taking measures to control current expenditure. In addition, the fiscal surplus was very high before the oil price decline, so that even the forecast deterioration by about 11 percentage points of GDP between 2014 and 2016 will only lead to a moderate deficit of 2.6% of GDP next year, with a moderate recovery to a deficit of 0.4% in 2017 driven by the recovery of oil prices.

Although around 50% of Qatar’s GDP comes from hydrocarbons, Fitch says a moratorium on most new hydrocarbon development declared in 2005 means that the sector is currently not a driving factor for GDP growth. Growth is instead primarily driven by spending on the government’s ambitious development programme and the population growth resulting from the associated high demand for labour. It predicts real GDP growth (using 2004 as the base year) is expected to stand at 6.6% in 2015, 5.7% in 2016 and 5% in 2017.