Global credit rating agency Moody’s has upgraded Qatar’s banking sector outlook to “stable” from “negative”, reflecting the resilience of the country’s economy and banking system to the ongoing economic and diplomatic blockade.

The rating agency also noted that the country’s banking sector profitability will remain “stable” with capital buffers remaining “strong”.

Highlighting that the banks’ operating environment stand to benefit from higher economic growth, Moody’s forecasts Qatar’s real gross domestic product (GDP) to grow 2.7% in 2018 (against 1.6% a year ago), supported by high levels of public spending.

Qatar remains among the fastest growing economies in the Gulf Cooperation Council (GCC), with momentum fuelled by government-financed infrastructure projects both as part of the country’s National Development Strategy and preparations for the 2022 FIFA World Cup, supporting the resilience of the operating environment and the banking system, it said in a report.

Highlighting that the Qatari economy has rebalanced as the supply chain disruptions following the blockade recovered rapidly with initial levels of imports restored in less than four months into the blockade; the rating agency said this illustrates the economy’s flexibility and policy effectiveness in re-routing supplies.

Expecting Qatari banks’ profitability to remain “stable” over the review period, with return on assets at around 1.4% by 2019; Moody’s said Qatari banks’ interest rate margins are slated to remain stable at 2.2% achieved in 2017, because the gaps between credit growth and deposit growth have been narrowing, reducing pressure on funding, which will support funding costs.

Moreover, Qatari banks have started re-pricing assets, which will further support any generalised increase in funding costs due to current rising interest rate environment.

Although a modest rise in non-performing loans are expected, necessitating “moderately” higher provisioning charges, it, however, said the adoption of the IFRS 9 accounting standard in the first quarter of 2018 means the early recognition of expected losses will ultimately support profitability over the outlook period.

“Qatari banks’ profitability will be supported by the system’s strong efficiency. Qatar’s small and concentrated population means that banks can service their customers without the need for an extensive (and costly) branch network,” Moody’s said, forecasting that the system’s cost-to-income ratio will remain between 25% and 30% into 2019, the lowest among GCC banks.

Moody’s said capital buffers remain strong with tangible common equity expected to remain “stable” around 15.5% of risk-weighted assets by end 2019, driven by slower than normal credit growth and higher profit retention, counterbalancing the impact on the recognition of expected credit losses taken from the reserves for the implementation of IFRS 9.

Qatari banks’ capital adequacy compares favourably with their GCC peers

“Under our base-case (or most likely) scenario, we expect the system-wide capital ratio to increase slightly over a two-year horizon, to 15.7% by end-2019, from 15.5% in 2017. This will be mainly driven by healthy pre-provision income,” Moody’s said.

Finding that Qatari banks maintain sound and stable liquidity buffers with liquid assets at 24% of total assets as of December 2017, the rating agency it expects the banks’ liquid assets to remain stable over the outlook period.

“The bulk of these liquid assets are held in Qatari government securities (rated Aa3, stable), which can be repo-ed with the central bank in times of market stress,” it added.

Two major events last week bear directly on global debates about climate change and how to address it. The fi rst was the release of a report from the United Nations Intergovernmental Panel on Climate Change (IPCC), which sets out precisely what must be done to achieve the objectives of the 2015 Paris climate agreement. The second was the announcement that Yale University economist William Nordhaus will share this year’s Nobel Prize in economics for his work “integrating climate change into longrun macroeconomic analysis.” The fi rst event should serve as a wakeup call for the international community. The IPCC report appeals to governments to take urgent action to reduce greenhouse-gas emissions signifi cantly within the next decade. It warns that if average global temperatures are allowed to exceed 1.5C – or, at worst, 2C – above pre-industrial levels, the consequences could be catastrophic, and they will be felt as soon as 2040. Worse, the report shows that the Nationally Determined Contributions set voluntarily by signatories to the Paris accord are vastly insuffi cient. Even if they are met, the increase in average global temperature will surpass 3C by 2100, and will continue to rise still further after that. Clearly, when policymakers revise their countries’ NDCs, they must raise them signifi cantly. But substantive action needs to come well before 2030. Otherwise, the world will suff er irreversible damage in the form of rising sea levels, loss of biodiversity, and deterioration of both land and marine ecosystems, including the potential extinction of the world’s coral reefs. These developments will have far-reaching implications for water supplies and the health and living standards of the global population. And, needless to say, the greater the warming, the more severe these eff ects will be.

The selection of Nordhaus for the Nobel Prize is a more welcome development. Even so, it is worth noting that his approach to addressing climate change tends to be rather conservative, which is to say gradualist. Nordhaus relies on traditional economic analysis, which “discounts” the present value of future consumption by the return on capital, or interest rates. In other words, $100 a half-century from now is worth $15, $10, or even less today, depending on the assumed interest rate. But, because the costs of any initiative to combat climate change must be borne in the present, they are necessarily higher at present values. The implication is that they must be incurred slowly. The problem with this approach is that it is inequitable toward future generations, which, of course, have no say in decisions that we make today. By defi nition, their welfare is being discounted. Yet were we to take intergenerational equity seriously, the leading factor to consider is that future generations will have better technologies than what we have today. Therefore, the appropriate social rate of discount should be equal to the rate of technological change, which is much lower than market interest rates. One could also argue that the traditional economic analysis is even inequitable toward individuals, in addition to future generations. Just ask an older person with an inadequate (or nonexistent) pension whether his present welfare is worth less than his past consumption. A much better approach has been developed by Nicholas Stern of the London School of Economics. In his now-famous “Review on the Economics of Climate Change,” Stern was calling for accelerated action to combat climate change as early as 2006. In his view, the costs of dealing with runaway global warming would far exceed the expense of addressing it early. Another alternative has been developed by Martin Weitzman of Harvard University.

Weitzman relies on analytical tools similar to those used by Nordhaus, but his work also accounts for the catastrophic risks associated with climate change. As such, his approach is also similar to that of the IPCC and the UN Environment Programme (UNEP), both of which have concluded that global warming above a certain level will have truly disastrous eff ects. To my mind, the Nobel Committee should have recognised not just Nordhaus but also some of these other economists of climate change, particularly Stern. The fact is that humanity cannot aff ord to act gradually on this issue. The Stern Review, the latest IPCC report, and the UNEP have all concluded that current eff orts to reduce emissions must be stepped up substantially. That means accelerating the global transition to clean-energy technologies (including in transportation), improving the effi ciency of energy production/consumption, reversing deforestation, improving land use, and promoting technological innovation to facilitate all of these processes. The message from the IPCC report is clear. All countries must raise their emissions-reduction targets and strengthen their commitments under the Paris agreement. And the country that is historically responsible for the largest share of greenhouse-gas emissions – the United States – must return to the agreement and show leadership on this issue once again. – Project Syndicate O José Antonio Ocampo is a board member of Banco de la República, Colombia’s central bank, professor at Columbia University, and Chair of the UN Economic and Social Council’s Committee for Development Policy.

Le petit émirat tient tête à Riyad depuis 17 mois, grâce à ses fabuleux revenus gaziers et à la souplesse des marchés internationaux de produits de consommation.

Shale gas developer Cuadrilla Resources expects to start gas fracking in northwest England next week, seven years after its first attempt to hydraulically fracture a well led to earth tremors, public protests and an overhaul of regulations.
The process, behind a surge in US gas production, involves fracturing rock deep under ground using a mixture of water, sand and chemicals to encourage the flow of hydrocarbons from shale, a dense and tightly-packed sedimentary rock.
It has draw criticism from the public and campaigners concerned about the environmental impact of fracking and the pollution caused by fossil fuels.
Protests against the practice led to work at Cuadrilla’s site being halted in 2011.
But the government, keen to cut Britain’s reliance on gas imports which soared to more than 50% of gas supplies, has tightened regulations and earlier this year gave consent for Cuadrilla to go ahead again.
Cuadrilla chief executive Francis Egan told Reuters that fracking of two wells and associated work would test gas flows.
“From that we’ll be able to make an assessment of how much gas is recoverable and whether it will be commercially viable to develop the site,” he said on the muddy Preston New Road site.
The industry’s future in Europe may hinge on the outcome.
Although fracking has grown rapidly in the United States, it has not been proved viable in Europe despite several attempts, including projects that failed in Poland five years ago.
Fracking has been banned in France, Germany and several other European countries.
Cuadrilla’s well will be the first fracked horizontal well in Britain and the results will be watched by shale explorers such as IGas, Egdon and Third Energy, as well as majors like Exxon which was unsuccessful in Poland.
The plans could also be delayed by an injunction hearing due on October 10.
Environment group Friends of the Earth said the injunction was sought by Bob Dennett, a resident in Lancashire, the English county where the project located.
The hearing “will decide whether the injunction is upheld or whether fracking can commence whilst there is an outstanding judicial review over emergency planning procedures at the site,” Friends of the Earth said in a statement.
Egan said this was a “last ditch, desperate attempt to slow us down” and said: “We think we have a very strong case to have that rejected and we will be in court next week arguing that.”
The British Geological Survey estimates shale gas resources in northern England alone could amount to 1,300tn cubic feet (tcf) of gas, 10% of which could meet the country’s demand for almost 40 years.
Britain has just 6.5 tcf in proved reserves and last year pumped 1.5 tcf, according to the BP Statistics Review.
Proved reserves are the strictest calculation of oil and gas that can be commercially extracted.
They change as discoveries are made.
Cuadrilla, owned by Australian mining servicing company AJ Lucas and US private equity fund Riverstone, said resource estimates were about 330 tcf for its licence area.
Cuadrilla’s aimed to test a consultancy estimate that a single 2.5km (1.25 mile) well would produce 6bn cubic feet (bcm) of gas over its lifetime or about 5mn cubic feet a day, Egan said.
If the tests are positive, Cuadrilla has permission for two more wells at the site located next to a road connecting the northern English towns of Preston and Blackpool.
Cuadrilla has enough funds for the current tests.
Its shareholder Riverstone, a $38bn private equity fund, has invested in US shale firms such as pipeline operator Kinder Morgan.

Oil markets look “adequately supplied for now” after a big increase in production over the last six months but the oil industry is coming under strain as it copes with increasing global demand, the West’s energy watchdog said yesterday.
The International Energy Agency said in its monthly report that the world’s spare oil production capacity was already down to only 2% of global demand, with further reductions likely to come.
“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the Paris-based IEA said.
Members of the Organisation of the Petroleum Exporting Countries and other exporters such as Russia and US shale producers had increased oil production sharply since May, the IEA said, raising output by 1.4mn barrels per day (bpd). Overall Opec had boosted production by 735,000 bpd since May as Middle East Gulf producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing US sanctions from next month.
And the outlook for world oil consumption was faltering.
The IEA cut its forecast of global oil demand growth by 0.11mn bpd for both this year and next to 1.28mn bpd and 1.36mn bpd respectively.
“This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data,” said the IEA, which advises major oil consumers on energy policy. OECD commercial stocks rose by 15.7mn barrels in August to 2.854bn barrels, their highest level since February, on strong refinery output and liquefied petroleum gas restocking, the IEA said.
It added that OECD inventories were likely to have risen by 43mn barrels in the third quarter, the largest quarterly increase in stocks since the first quarter of 2016.
“The increase in net production from key suppliers since May of approximately 1.4mn bpd, led by Saudi Arabia, and the fact that oil stocks built by 0.5mn bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the argument that the oil market is adequately supplied for now,” the IEA said.

Bloomberg/London BP boss Bob Dudley launched a wide-ranging attack on the divestment movement that’s calling on institutional investors to sell down their oil stocks, rejecting warnings from the likes of the Bank of England that hydrocarbons present a risk to the financial system. There are “people who want to drive a wedge between the energy industry and investors – between oil and money,” Dudley said on Wednesday at the Oil & Money conference in London. “They push for potentially confusing disclosures, raise the spectre of a systemic risk to the financial system from stranded assets, and campaign for divestment.” The criticism puts the British oil major at odds with the country’s central bank. Governor Mark Carney has suggested that the fight against climate change could leave some oil reserves stranded – effectively worthless – and that the exposure of UK investors is “potentially huge.” Now asset managers are increasingly prodding the world’s biggest polluters to come up with stronger green strategies. Proponents of the divestment movement “are driven by good intentions, but my concern is that their suggested recommendations could lead to bad outcomes,” Dudley said. “We could take a different, more innovative and collaborative path. One that recognizes many fuels must play a part in meeting the dual challenge – albeit made much cleaner.” Since activist group 350.org started the climate divestment movement in 2012, multiple institutional investors have signed up to the six Principles for Responsible Investment, a UN-backed framework for incorporating environmental, social and governance issues into investment practices. Carney himself is leading a group called the Task Force on Climate-Related Financial Disclosures, prodding companies to make transparent the risks they face from environmental rules. Dudley cautioned that such disclosures can open companies up to potential litigation. “I know what will happen: we’ll get sued by a certain industry because we’re off the path after a year,” he said. “So we need some sort of safe-harbour statements” from the regulator before that can work.

BP boss Bob Dudley launched a wide-ranging attack on the divestment movement that’s calling on institutional investors to sell down their oil stocks, rejecting warnings from the likes of the Bank of England that hydrocarbons present a risk to the financial system.
There are “people who want to drive a wedge between the energy industry and investors – between oil and money,” Dudley said on Wednesday at the Oil & Money conference in London. “They push for potentially confusing disclosures, raise the spectre of a systemic risk to the financial system from stranded assets, and campaign for divestment.”
The criticism puts the British oil major at odds with the country’s central bank. Governor Mark Carney has suggested that the fight against climate change could leave some oil reserves stranded – effectively worthless – and that the exposure of UK investors is “potentially huge.” Now asset managers are increasingly prodding the world’s biggest polluters to come up with stronger green strategies.
Proponents of the divestment movement “are driven by good intentions, but my concern is that their suggested recommendations could lead to bad outcomes,” Dudley said. “We could take a different, more innovative and collaborative path. One that recognizes many fuels must play a part in meeting the dual challenge – albeit made much cleaner.”
Since activist group 350.org started the climate divestment movement in 2012, multiple institutional investors have signed up to the six Principles for Responsible Investment, a UN-backed framework for incorporating environmental, social and governance issues into investment practices.
Carney himself is leading a group called the Task Force on Climate-Related Financial Disclosures, prodding companies to make transparent the risks they face from environmental rules. Dudley cautioned that such disclosures can open companies up to potential litigation. “I know what will happen: we’ll get sued by a certain industry because we’re off the path after a year,” he said. “So we need some sort of safe-harbour statements” from the regulator before that can work.

European Central Bank chiefs were divided at their September meeting over the danger to the eurozone economy from protectionism and other global threats, with some calling for a gloomier assessment.
“It was remarked that a case could also be made for characterising the risks to activity as now being tilted to the downside,” according to a regular account of the private gathering published by the ECB yesterday.
Following the September 13 meeting, ECB president Mario Draghi told journalists that risks to the 19-nation single currency area remained “broadly balanced”. The account reveals colleagues on the institution’s governing council had earlier highlighted “risks relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility having gained more prominence recently”. In the end, policymakers decided to stick to the “broadly balanced” language.
“The underlying strength of the economy was judged to be mitigating downside risks,” they agreed.
At its meeting in Bali this week, the International Monetary Fund (IMF) also expressed caution for the eurozone over growing risks, downgrading its 2018 growth forecast from 2.2 to 2.0%. A slowdown in economic activity could trip up the ECB as it winds down its “quantitative easing” (QE) mass bond-buying scheme, designed to boost economic growth and inflation by pumping cash through the financial system and into the real economy.
It is on the home stretch of its exit, slashing monthly purchases of government and corporate debt by half to €15bn ($17.4bn) in October before a planned stop in December.
But with inflation projected to hover around 1.7% between this year and 2020, the central bank remains short of its target of price growth close to, but below 2.0%. Even after the end of QE, it plans to keep interest rates at historic lows “through the summer of 2019” to help keep credit flowing to firms and households.
The ECB kept policy unchanged as expected last month, staying on track to wrap up a €2.6tn ($3tn) bond purchases scheme this year and raise interest rates next autumn, continuing its slow but steady pace of policy tightening.
Indeed, even as trade tensions weighed on growth and a stock market selloff amplified growth fears, some policymakers argued that was not enough for the bank to backtrack on policy normalisation.
“A gradual pace of monetary policy normalisation is justified,” Finnish central bank chief Olli Rehn said in Indonesia on yesterday. “The current strength of the euro area economy supports our confidence that inflation will converge towards… the ECB’s price stability target.” But some policymakers appear to be increasingly cautions, according to the minutes.
“A remark was made that some of the factors behind the (downward growth) revisions might not be entirely of a transitory nature,” the minutes showed. “It was also argued that there could be larger spillovers from weaker external demand to domestic demand.”
Still, while some policymakers argued that the case could be made for downgrading the risk assessment, there was agreement that the underlying strength of the economy would mitigate the downside risks to activity.
“High-frequency indicators had stabilised and remained at elevated levels, underlining the overall robustness of economic activity,” chief economist Peter Praet told policymakers at the meeting, the minutes showed. With years of unprecedented stimulus finally lifting inflation, the ECB has been dialling back support, but only by the smallest of increments, fearing that bigger moves risked unravelling its work.
While the ECB has not explicitly pledged any rate hikes, policymakers, including Praet, have argued that they were comfortable with market expectation for a small increase in the fourth quarter of 2019, followed by only small and infrequent moves.
“To be any more precise than that, to lock in a date, to tie our hands, would be rather risky,” Ardo Hansson, Estonia’s central bank chief said at the annual meeting of the International Monetary Fund yesterday.
“When we get closer, we can have another discussion if we need to adjust the language again, but this is not a debate we are going to have just yet,” Hansson said.
Policymakers also concluded last month that domestic cost pressures continued to build and broaden, indicating that inflation would rise, moving back towards the bank’s target of almost 2% after undershooting it for over five years.