Qatar’s banking system outlook remains stable, supported by high levels of public spending, Moody’s Investor Service said in a report.

The outlook expresses Moody’s expectation of how bank creditworthiness will evolve in the system over the next 12-18 months.

"Despite currently low oil prices, we expect that Qatar's real GDP will expand by 7 per cent in 2015, as a combination of sizable government resources and a relatively low fiscal breakeven level allows elevated public spending and hence continued economic expansion," says Nitish Bhojnagarwala, Moody's assistant vice president and author of the report.

Key takeaways:
•    Qatar’s real GDP is likely to expand by 7 per cent in 2015 (6.2 per cent in 2014) as a combination of vast sovereign wealth funds (147 per cent of GDP) and a relatively low fiscal breakeven oil price (at $59 per barrel for 2015 ) helps the government maintain its extensive public spending programme and drive economic expansion.

•    Government spending is expected to translate into 10.7 per cent growth in the non-hydrocarbon sector, offsetting weakened liquefied natural gas (LNG) output and fostering domestic loan growth of 10 per cent-15 per cent.

•    NPLs will remain at around 1.5 per cent-2 per cent of gross loans over the next 12-18 months.

While Moody's expects that capitalisation levels will remain solid, they will likely decline slightly, with the tangible common equity to risk-weighted assets ratio in the 15 per cent-17 per cent range over the outlook horizon, the report said.

“For 2015, we expect oil prices to average around $55 a barrel. Although this remains marginally below Qatar’s expected fiscal breakeven oil price of around $59 a barrel (which has risen considerably from $27/barrel in 2009), this breakeven price is among the lowest in the GCC, underpinning the government’s ability to support public spending and credit growth,” said Bhojnagarwala.

“However, as per IMF latest reports, Qatar is expected to report a modest fiscal surplus for 2015 driven by marginally higher oil price expectations.

“Furthermore, Qatar’s fiscal strength, including reserves accumulated over the last decade, will support high spending levels while oil prices remain low. As the largest exporter of Liquefied Natural Gas (LNG) in the world, Qatar has reported fiscal surpluses averaging around 11 per cent of GDP since 1999-2000, owing to the hydrocarbon-driven boom. Nominal GDP has increased almost tenfold over the last decade to an estimated $212 billion in 2014,” he added. – TradeArabia News Service