Re­gional dis­pute hurt­ing GCC economies: Moody’s ‘Busi­ness as usual’ for Qatar’s $300bn sov­er­eign fund

Kuwait Times - - FRONT PAGE -

DUBAI: A boy­cott of Qatar by a Saudi-led bloc of Arab states is hurt­ing the economies of all the coun­tries in­volved, with Bahrain and Qatar the most af­fected, Moody’s In­vestor Ser­vice said yes­ter­day. The row has trans­lated into a credit neg­a­tive for the en­tire six-na­tion Gulf Co­op­er­a­tion Coun­cil (GCC) - Saudi Ara­bia, the United Arab Emi­rates, Bahrain, Kuwait, Oman and Qatar, Moody’s said in a re­port.

Saudi Ara­bia, the United Arab Emi­rates, Bahrain and Egypt on June 5 sev­ered diplo­matic ties and im­posed eco­nomic sanc­tions on Qatar, ac­cus­ing it of back­ing rad­i­cal Is­lamist groups. Doha has de­nied the charges. “The sever­ity of the diplo­matic dis­pute be­tween Gulf coun­tries is un­prece­dented, which mag­ni­fies the un­cer­tainty over the ul­ti­mate eco­nomic, fis­cal and so­cial im­pact on the GCC as a whole,” said St­ef­fen Dyck, Moody’s vice pres­i­dent.

Qatar faces large eco­nomic, fi­nan­cial and so­cial costs stem­ming from re­lated travel and trade re­stric­tions, it said. The im­pact on Qatar so far has been most acute for trade, tourism and the banking sec­tor. Size­able 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, Moody’s said.

It es­ti­mates that Qatar used $38.5 bil­lion-equiv­a­lent to 23 per­cent of its GDP-to sup­port the econ­omy in the first two months of sanc­tions. Moody’s said it does not ex­pect that Qatar will have to bor­row from the in­ter­na­tional

cap­i­tal mar­ket this year, but its fi­nanc­ing costs will in­crease. The stand­off could also im­pair the sus­tain­abil­ity of Bahrain’s cur­rency peg to the US dol­lar and will also in­crease the cost of bor­row­ing for the king­dom, the poor­est of the six oil-rich GCC na­tions. The diplo­matic rift will inevitably im­pair the func­tion­ing of the GCC more se­verely as the row pro­longs.

Mean­while, the head of the Qatar In­vest­ment Author­ity said yes­ter­day that the lin­ger­ing Gulf po­lit­i­cal cri­sis was hav­ing lit­tle im­pact on the $300 bil­lion sov­er­eign wealth fund of the gas-rich na­tion. In a rare pub­lic ap­pear­ance, Sheikh Ab­dul­lah Bin Mo­hamed Bin Saud Al-Thani, chief ex­ec­u­tive at the QIA, said there was “no prob­lem” for the fund de­spite the cri­sis pass­ing the 100-day mark.

“We are still open for busi­ness and busi­ness as usual,” Sheikh Ab­dul­lah said in an ad­dress at the Carnegie Mel­lon Univer­sity in Qatar. “We are fine,” he added. Qatar has found it­self re­gion­ally iso­lated since June 5. Pressed on the im­pact of the cri­sis sev­eral times, Sheikh Ab­dul­lah said the QIA’s ex­po­sure to those coun­tries lead­ing the boy­cott was “very, very small” and added that the fund would con­tinue its re­cent pol­icy of tar­get­ing hi-tech and in­fra­struc­ture com­pa­nies in the United States.

“The fu­ture is technology,” he said. Among the com­pa­nies in which the QIA was in­vest­ing were those in the health sec­tor us­ing hi-tech so­lu­tions for can­cer treat­ment, said Sheikh Ab­dul­lah. In 2015 he an­nounced that the QIA would in­vest up to $35 bil­lion in the United States over the fol­low­ing five years, af­ter tar­get­ing high-pro­file ac­qui­si­tions in Europe. Last De­cem­ber it was also an­nounced the fund would in­vest $10 bil­lion in US in­fra­struc­ture projects.

He said yes­ter­day that around half of that $45 bil­lion had been in­vested. The QIA has opened an of­fice in New York and will do so soon in the Sil­i­con Val­ley, he added. “If you want to in­vest in the States, you have to have boots on the ground,” he said. Ear­lier this week it was an­nounced that the QIA and Swiss com­modi­ties trader Glen­core had sold a ma­jor part of a stake they had only re­cently ac­quired in Rus­sian oil gi­ant Ros­neft to Chi­nese con­glom­er­ate CEFC. The QIA is con­sid­ered one of the world’s big­gest sov­er­eign funds, swollen by Qatar’s mas­sive gas and oil rev­enues. — Agen­cies

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