Qatar’s Outlook Shifted to Negative Following Diplomatic Dispute

Moody’s Investors Service has changed its outlook for Qatar to negative from stable based on the economic and financial risks associated with the ongoing dispute between the nation and its Gulf Cooperation Council neighbors like Bahrain, Saudi Arabia and the United Arab Emirates.

“In Moody's view, the likelihood of a prolonged period of uncertainty extending into 2018 has increased and a quick resolution of the dispute is unlikely over the next few months, which carries the risk that Qatar's sovereign credit fundamentals could be negatively affected,” the ratings agency said.

Moody’s also affirmed Qatar’s rating at Aa3, reflecting the agency’s positive view of Qatar’s credit strengths, including a sizeable net asset position of the government and remarkably high levels of wealth that will continue to support the sovereign’s credit profile. The government has approximately $35 billion in net international reserves at the Qatari Central Bank and more than $300 billion of assets managed by the Qatar Investment Authority.

Amidst the dispute, the coalition has severed diplomatic relations, closed borders and expelled Qatari nationals from their countries, Moody’s reported. The coalition has also issued 13 demands of Qatar that it must meet in order to see relief. A quick resolution to the crisis has yet to arise, and the state of affairs is likely to impact economic activity. So far, there have been reports of disruptions to some nonhydrocarbon exports and a forced shutdown of helium production. Tourism is also likely to be hit by the termination of direct flights to the nation.

“Moody's thinks that a prolonged period of uncertainty will negatively affect business and foreign investor sentiment and could also weigh on the government's long-term diversification plans to position the country as a hub for air traffic, tourism, medical services, education and sports through a higher-risk perception among foreign investors.”

– Nicholas Stern, senior editor

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