S&P touts high exposure to real estate and aggressive overseas expansions as weaknesses to the Qatari economy - IFN

S&P touts high exposure to real estate and aggressive overseas expansions as weaknesses to the Qatari economy

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QATAR: Rating agency S&P has identified high exposure to real estate, aggressive overseas expansions by banks, and heavy reliance on cross-border funding as key weaknesses to the Qatari economy, one of the wealthiest Arab countries with a GDP of US$98,000 per capita. Its banking sector is rated at ‘AA/Stable/A1+’, among the highest ratings assigned by the rating agency, while its economic risks remains ‘average’. According to the rating agency, local banks’ heavy exposure to cyclical sectors such as real estate and construction as well as aggressive overseas expansions, signal a high risk appetite. However lending growth is expected to slow down to 15% in 2013 and in the future following robust asset expansion in the previous years. Growth in the country is expected to be driven to a large extent, by exposure to the government and government-related entities as well as government-backed projects where risk remains limited. Qatar’s real estate market is expected to bounce back after seeing a sharp decline in 2009, with the commercial sector identified as being more risky than the residential housing market. The report also added that Qatar’s economy is expected to continue showing robust momentum despite an expected slowdown due to strong private consumption and the government’s infrastructure development program. Despite making some progress towards diversifying its economy, the country still depends heavily on LNG production.