Qatar cut to AA- by Fitch with no end in sight to Gulf dispute

Qatar’s sovereign rating was cut to AA- by Fitch Ratings, which cited little progress toward ending a Saudi Arabia-led embargo of the emirate.

Fitch lowered the Gulf state’s sovereign long-term debt rating by one notch, putting it on par with Belgium and South Korea. The outlook is negative, the New York-based firm said in a statement Monday.

“International mediation efforts are still ongoing but are not showing significant progress,” Krisjanis Krustins and Jan Friederich, Fitch analysts said. “In our view, the negotiating positions of Qatar and the boycotting countries remain far apart.”

Qatar, the world’s largest exporter of liquefied natural gas, was put on a negative rating watch in June after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic ties and transport routes with the country. The four countries accuse Qatar of destabilizing the region through support of Islamist movements, a charge it denies. The Gulf nation’s economy will expand this year at the slowest pace since 1995, according to economists surveyed by Bloomberg this month.

Qatar’s foreign deposits fell almost 8 percent in July, according to central bank figures, and the nation is telling its banks to go to international investors for funding instead of relying on the state, according to people familiar with the matter. Qatar is spending billions of dollars preparing to host the soccer World Cup and turn Doha, the capital, into a regional hub.

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.