Standard & Poor's Ratings Services said today that it raised its long-term sovereign ratings on the State of Qatar to 'AA' from 'AA-'.

At the same time, the 'A-1+' short-term ratings were affirmed. The outlook is stable. The transfer and convertibility (T&C) risk assessment remains 'AA+'.

'Additionally, we raised our issue rating on the $700 million floating rate Global Sukuk (Trust certificates) callable series due September 10, 2010, for which the obligor is the State of Qatar, to 'AA' from 'AA-'. The upgrade is based on the government's strengthening fiscal and external balance sheets, with strong growth prospects spurred by new large liquefied natural gas (LNG) projects in 2010-2012,' said Standard & Poor's credit analyst Luc Marchand.

The ratings are constrained by still-nascent public institutions, limited transparency particularly with respect to government assets, and geopolitical risks faced by all sovereigns in the region.

'In our opinion, Qatar's economy is weathering the global downturn well, with deflationary pressures and financial sector problems contained by the economic policy flexibility generated by new gas projects.'

'Qatar is projected to stand among the fastest growing economies in 2010. We expect real GDP per capita to expand by close to 11 per cent in 2010, thanks to investments in the LNG industry, which will raise production to 78 million tons per year by 2012 (from 37 million tons in 2009) and boost export receipts.'

'Together with expected higher prices, this is projected to raise nominal GDP by over 40 per cent, more than reversing an 11 per cent decline in 2009. In our opinion, this strong growth will have favourable repercussions on Qatar's fiscal and external accounts, providing abundant revenues and export receipts as early as the fourth quarter of 2010.'

'The stable outlook balances Qatar's strong fiscal and external positions against monetary and banking sector challenges and political risks, both geopolitical and as related to developing domestic institutions,' added Marchand.

Further significant improvements in the amount and transparency of disclosure of the general government net asset position, and progress on institutional reforms could have a favourable impact on the ratings in the coming years, as would a lasting reduction of geopolitical risk.

Conversely, the ratings could be lowered by several notches if regional geopolitical risks were to escalate sharply, threatening Qatar's political and economic stability. If political stability were to be compromised by domestic events, the ratings on Qatar could also come under pressure, he added.-TradeArabia News Service