Qatar's woes seem to never end, as the oil-rich country gears up to face the consequences of the diplomatic cut-off that its neighbors have announced. Now, Standard & Poor has slashed the credit rating of the country following a dip in its currency value.
Diplomatic ties end and usher in troubles for Doha
According to the rating agency, the rating cut is directly the result of the announcement by Arab countries to cut off all diplomatic ties with Qatar, causing the latter's economy to suffer a major shock. As readers will remember, Saudi Arabia, Egypt, Bahrain and the United Arab Emirates have cut all diplomatic ties and closed down all transport links to and from Qatar. The decision was taken by these countries owing to the continued links to terrorism that they believe Qatar continues to have.
S&P has cut the rating from AA to AA- and it has also been put on the CreditWatch list but with negative expectations, further indicating that the future may bring more unfavorable news for the country. It is expected that another downgrade may be in the offing if the country's economy suffers any further losses. Meanwhile, Qatar's currency has also spiraled down and the Riyal touched low figure that it has not seen in over a decade.
Elaborating on the rating cut, S&P spokespersons have said that there is an expectation that Qatar's economy will slow down significantly, thanks to the sudden elimination of regional demand. There have been clear signs that investors are very wary about pouring cash into Qatar given the recent developments and funds actually leaving the country.
The rating agency also expects the region's growth to remain subdued or worsen further because of the significant damage that the corporate profitability has sustained here. In a telling move, Moody's has also rated Qatar at Aa3, which matches the S&P AA-, while Fitch rates its AA.
The Riyal is expected to depreciate in the coming year to the degree of some 1.5%. While this may not seem to be very significant, the signs that substantial amounts of money will flow out of Qatar in the near future is not a very positive factor. The market movements also indicate that investors are pulling out of Qatar's stocks and cashing in before the economy nose dives and wipes out their entire investment.