Fitch downgrades Qatar to AA-; outlook negative

Qatar’s sovereign rating was cut to AA-, with a negative outlook by Fitch Ratings, which cited little progress toward ending an Arab boycott.

"Fitch believes Qatar's diplomatic and logistical isolation by some of its neighbours is unlikely to be resolved for some time. The group of countries led by Saudi Arabia and the UAE continue their boycott against Qatar, and their land, air and sea borders with Qatar remain mostly closed. International mediation efforts are still on-going but are not showing significant progress. In our view, the negotiating positions of Qatar and the boycotting countries remain far apart," said the international rating agency in a statement.

Fitch estimates the pace of fiscal consolidation will slow as the government bears some of the increased cost of imports and postpones certain non-oil revenue measures in a bid to support economic activity and sentiment.

"We expect Qatar's sovereign net foreign assets, SNFA, to fall to 146 percent of GDP in 2017 from 185 percent of GDP in 2016 as the public sector, including the Qatar Investment Authority, continues to move some of its deposits into Qatar's banks, offsetting the outflow of non-resident deposits," added the statement.

Fitch and the other leading ratings firms, Moody's Investors Service and Standard & Poor's, worry that the conflict will pressure Doha's finances. Lower credit rates could push up Qatar's borrowing costs.

S&P said Sunday that the continuing boycott will slow down Qatar's economy, keeping its AA- rating and negative outlook on the country's long-term prospects.