Qatar economic outlook downgraded by Moody's amid Gulf crisis

Ratings agency Moody’s downgraded its outlook on Qatar’s long-term debt as the Gulf state attempts to come to an agreement with its neighbours following a recent diplomatic crisis in the region.

Moody’s changed the outlook to ‘negative’ from ‘stable’ in a statement on Wednesday in response to the ongoing blockade of the country by an alliance led by Saudi Arabia.

Saudi, Bahrain, UAE and Egypt extended a deadline given to the oil and gas-rich nation to comply with a list of 13 demands, which was handed to Qatar alongside allegations that it had been funding terrorism.

Moody’s said: "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."

The ratings agency added that the ongoing crisis "carries the risk that Qatar's sovereign credit fundamentals could be negatively affected."

The group of Arab nations which slapped the demands on Qatar said on Wednesday they had received a response from the country’s authorities, adding that they would answer ‘in a timely manner’.

GAS PRESSURE

Qatar’s gas production has not been affected as of yet, as the country has moved to boost output from its North Field, the second largest natural gas field.

However, pressure will grow the longer the crisis rumbles on.

“Qatar has a major dominant position in gas production and the country is without any doubt facing a major battle to protect its economic health,” said Naeem Aslam, chief market analyst at Think Markets UK.

“The announcement of boosting the gas production from its mammoth North Field, not only escalates tensions between the two countries, because it shares this field with Iran, but also presents a threat for the gas price too.”