Qatar’s real gross domestic product (GDP) growth is expected to average 5.8% in 2026-2027, compared with an average growth of 2% in 2024-2025, according to S&P Global Ratings.

The higher growth will be driven by the North Field Expansion project, which will increase LNG production by nearly 35% by 2027, credit analyst Juili Pargaonkar said.

However, the Gulf state will record a slower domestic credit growth of around 5% in 2025-2026 compared to the 11% average in 2019-2022 amid a return to normal non-hydrocarbon economic activity, relatively flat LNG production until 2025, and completion of many capital projects that imply a lower credit requirement.

Despite the high geopolitical tensions in the Middle East, S&P currently does not expect a full-scale regional conflict, and expects macroeconomic conditions in Qatar to remain broadly stable.

The country's banking sector is forecast to remain profitable and benefit from strong capitalisation and adequate liquidity. Nevertheless, the sector will record a modest drop in net interest margins owing to interest rate cuts, Pargaonkar added.

While the external debt is about one-third of domestic credit, the expectation of lower funding needs and the government’s highly supportive stance towards the banking sector mitigates the risk of external debt outflows if geopolitical risk escalates, the analyst said.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)