Qatari banks face growing risks from real estate downturn, says Fitch

A view of Doha Bank Tower (R) in Doha, Qatar. (File/AFP)
Updated 16 May 2019
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Qatari banks face growing risks from real estate downturn, says Fitch

  • Qatar has seen its rental prices slide by 20 percent over the past three years
  • Analysts expect these prices to fall further as a wave of projects tied to the tournament come online over the next three years

DOHA: Qatari banks face growing pressure from high exposure to the country’s sluggish real estate market, hit by oversupply tied to preparations for its 2022 World Cup, ratings agency Fitch said.
The tiny but wealthy Gulf state has seen its rental prices slide by 20 percent over the past three years. Analysts expect these prices to fall further as a wave of projects tied to the tournament come online over the next three years.
Qatar has had the added challenge of a diplomatic and trade boycott imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt since 2017. The move has hit tourism and dampened demand for real estate from foreign buyers.
The bloc accuses Qatar of supporting terrorism, which Doha denies. Qatar has since moved to liberalize its real estate sector, opening up new areas to foreign buying in a bid to boost demand.
While Qatari banks have largely bounced back from liquidity issues arising from the 2017 boycott, when around $30 billion in deposits left the system, Fitch said deteriorating real estate assets are now a “key risk.”
“Qatari banks’ concentrated exposure to the weakening domestic real estate market is an increasing risk to asset quality,” Fitch said, naming Doha Bank, Commercial Bank, and International Bank of Qatar as the most exposed.
“The real estate and hospitality sectors, already facing falling prices due to oversupply in preparation for the 2022 World Cup, have been further pressured by reduced tourism and occupancy rates resulting from the boycott of Qatar.”
Fitch said however that Qatari banks’ credit ratings would not be affected “as they are driven by our assumption of the authorities’ propensity and ability to provide support to the banks, if needed.”
Qatar injected about $40 billion into its banking system in the months after the boycott in order to boost liquidity.


US, China need to reverse course in trade row to help economy: OECD

Updated 30 min 14 sec ago
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US, China need to reverse course in trade row to help economy: OECD

  • OECD: The global economy would grow by only 3.2 percent this year
  • China, which is not an OECD country, has been seeking to stimulate its economy

PARIS: Economic growth in China and the United States could be 0.2-0.3 percent lower on average by 2021 and 2022 if the two countries do not row back on tit-for-tat tariffs in their dispute that has dampened the global economic outlook, the OECD said on Tuesday.
US President Donald Trump has raised tariffs on $200 billion on Chinese imports to 25 percent from 10 percent in the long-running trade row, while Beijing said it would hit back by lifting tariffs on $60 billion in US goods.
The global economy would grow by only 3.2 percent this year as growth in trade flows is nearly halved this year to only 2.1 percent, the Organization for Economic Cooperation and Development (OECD) said in its biannual Economic Outlook.
That would be the slowest pace of global economic growth since 2016 and was down marginally from the Paris-based policy forum’s last forecast in March for growth of 3.3 percent.
The world economy should fare slightly better next year with a growth rate of 3.4 percent, but only if the United States and China pull back from tariff hikes announced this month.
The OECD said growth in China and the United States could come in 0.2-0.3 percent lower on average by 2021 and 2022 if the two nations did not reverse course.
Without taking the latest round of tariff increases into account, the OECD forecast the United States would outpace other big developed economies with growth of 2.8 percent this year, up from the 2.6 percent the organization had projected in March.
The world’s biggest economy was seen slowing to 2.3 percent next year even if the new tariff hikes are not carried through.
China, which is not an OECD country, has been seeking to stimulate its economy but growth was still seen easing from 6.2 percent this year to 6.0 percent in 2020, the lowest rate in 30 years for the world’s second-biggest economy.
Global investors are closely watching to see how much more support Beijing will inject to shore up growth after China already loosened monetary policy, cut taxes and allowed local governments to issue special bonds to fund infrastructure projects.
Japan’s export-dependent economy is suffering from the drop in trade flows with growth expected at only 0.7 percent in 2019 and 0.6 percent in 2020, trimmed from the OECD’s March forecasts of 0.8 percent and 0.7 percent respectively.
The euro zone is also paying a heavy price for the global trade slowdown, with its growth seen this year at 1.2 percent before rising to 1.4 percent year. That was slightly better than the 1.0 percent and 1.2 percent expected in March as Italy’s downturn proves slightly less severe than previously expected
Meanwhile, the OECD raised Britain’s growth forecast to 1.2 percent this year from 0.8 percent previously, as the prospect of its exit from the European Union was pushed back. UK growth is expected to fall to 1.0 percent, marginally better than the 0.9 percent expected in March.