Moody’s says in new report that the GCC crisis over Qatar’s ties with terrorism, is credit negative for all GCC countries, but especially for Qatar.
Here are the main points in the report:
- More than three months since the diplomatic row began; Qatar faces large economic, financial and social costs stemming from related travel and trade restrictions. Qatar's future credit trajectory will depend heavily on the evolution of the dispute.
- The negative impact of the dispute has so far been concentrated in the trade, tourism and banking sectors, and increased the country's financing costs.
- To some extent, GCC countries such as Oman and Kuwait could actually benefit marginally from the diversion of trade along other GCC routes. However, non-oil trade is small, particularly in Kuwait where it accounts for less than 10% of total exports (4% of GDP), so any impact on growth is likely to be negligible.
- Moody’s estimates that Qatar has injected almost $40 billion out of a total $340 billion of its financial reserves to support its economy and financial system during the first two months of the standoff.
- Sizable capital outflows in the vicinity of $30 billion flowed out of Qatar's banking system in June and July, with further declines expected as GCC banks opt not to roll over their deposits.
- Among Qatar's GCC critics, Bahrain is most exposed to an escalation of regional tension. However, the country's strong alliance with Saudi Arabia and the United Arab Emirates, which have provided support in the past, mitigates this risk to some extent.