Fitch Affirms Qatar at ‘AA’ with Negative Outlook
Fitch Ratings has affirmed Qatar’s Long-Term Issuer Default Ratings (IDRs) at ‘AA’ and removed them from Rating Watch Negative (RWN). The outlook is accorded as negative.
The rating actions capture the risk from a further prolongation of the period in which Qatar cannot export LNG to the sovereign balance sheet, which has held up well so far, Fitch said.
Rating analysts noted that the removal from RWN reflects that, while the geographic concentration and high complexity of Qatar’s LNG facilities are a vulnerability, the risk of further severe damage has reduced since March, and the impact of the war on the credit profile will take longer to discern.
The ‘AA’ rating reflects GDP per capita among the world’s highest, large sovereign assets, our expectation that additional gas production will further strengthen public finances and a relatively flexible public finance structure.
Rating weaknesses include heavy hydrocarbon dependence with significant vulnerability to geopolitical risks, below-average scores on some governance measures, higher government debt/GDP than oil-dependent, highly rated peers, and substantial contingent liabilities.
Disruption to the Strait of Hormuz has compromised Qatar’s ability to export LNG, with only a limited number of cargoes having transited since the war started.
“We assume that some form of deal will enable conditions conducive to the resumption of exports through the Strait in 1Q27, after which it will take around six months to reach the pre-war level minus the 17% of capacity damaged by the Iranian attack on Ras Laffan in March”.
Fitch said the war has had only a small impact on the first phase of the North Field expansion, and a substantial increase in production capacity will begin in 2027, although production is contingent on conditions in the Strait. LNG exports through the Dolphin pipeline and exports within the Strait have not been affected.
Ratings analysts noted that the sharp reduction in energy production will widen the fiscal deficit, which Fitch forecasts at 2.7% of GDP in 2026.
“Our projections include our estimates of investment income on Qatar Investment Authority (QIA) external assets; excluding these, our deficit forecast is 7.1%”.
The impact on fiscal revenues will be partly offset by the boost from the opening of the Golden Pass LNG facility in the US (70% owned by Qatar Energy; QE) and by higher profits from QE’s energy trading business.
Fitch also expects lower spending in line with government instructions to ministries. Capex, at 32% of budgeted spending, provides significant flexibility.
Much higher energy revenues will restore the balance to surplus in 2027, when we also expect new revenue raising measures. The further ramp-up of gas output will widen the surplus in 2028.
Fitch expects the 2026 deficit to be largely funded by debt and drawdowns on the fiscal stabilisation fund (held in liquid assets outside Qatar).
“We anticipate the QIA will contribute a small part of the financing requirement. We project debt will rise to 64.1% of GDP at end-2026, from 51.3% in 2025, but it is likely to decline over the medium term”.
The trajectory will largely be determined by how the government deploys fiscal surpluses, which will depend in part on the rate of return on investments relative to the yield on government debt.
Ratings analysts assume that surpluses will be used to rebuild the stabilisation fund and boost government assets, while keeping debt above the peer median.
According to the rating note, Qatar sovereign net foreign assets (SNFA) will remain very large. We project them at 254.2% of GDP at the end of 2026, as a 3% fall in their nominal value is offset by a lower denominator.
Fitch is comfortable with the availability of liquid assets that could be drawn to shore up public or external finances if needed, but relies on estimates for its assumption of QIA’s total assets.
Ratings analysts stated that SNFA will exceed its end-2025 nominal value in 2028 as flows from budget surpluses resume.
“We estimate that Qatar’s economy will remain a net external creditor at end-2026 (total net asset positions are much stronger given our estimate of QIA equity holdings) and this position will recover as exports rebound.
“Lower energy exports will cause a rare current account deficit in 2026, of 4.6% of GDP. The current account will return to surplus, which will be close to double digits in 2028, as energy exports recover”.
The large banking sector has been resilient to the war despite structural vulnerabilities. Non-resident deposits are large but have been broadly stable since the start of the war.
Fitch said the improvement in the sector’s net foreign asset position has continued and is at its lowest in over two years, although it remains substantial, at negative USD 111 billion at the end of June. There has been an increase in public sector deposits.
Volatile Growth Path: Fitch forecasts the economy will contract by 18.8% this year, owing to lower LNG production resulting from disruptions in the Strait of Hormuz.
A modest decline in non-oil growth is expected, owing to weaker downstream activity and lower tourist arrivals. A sharp rebound is anticipated due to the normalisation of LNG flows and the start of production from the North Field expansion.
A further ramp-up of output from the North Field will underpin growth that will remain in double digits in 2028. #Fitch Affirms Qatar at ‘AA’ with Negative Outlook# Qatar Says Diplomatic Efforts Intensify to End Strait of Hormuz Crisis
