'We continue to see strong projected GDP [gross domestic product] growth, fiscal prudence and decreasing government debt, as well as ambitious political reforms.' said S&P associate director Luc Marchand.

S&P estimates economic growth at 8.2 per cent in 2004 and above 5 per cent in 2005 and 2006, before surging to 11.1 per cent in 2007, when a raft of new liquefied natural gas (LNG) capacity comes on stream. As a result, per capita income is set to climb to $37,800 in 2007, up from $32,165 this year.

Rising energy receipts will also see Doha enjoying budget surpluses of over 10 per cent of GDP in the next three years, S&P said. For fiscal 2004/05, the government budgeted a deficit of 2.5 per cent of GDP, based on an oil price of $19 a barrel. However, S&P forecasts a budget surplus of 11.6 per cent, assuming an average price of $34.5 a barrel. The agency also forecasts a falling government debt figure of 44 per cent of GDP for 2004/05, and an overall reduction in the government's debt burden to 19 per cent in 2005/06, as the late 1990s strategy of borrowing to develop the LNG industry is further rewarded.

S&P has assigned Qatar a long-term foreign and local currency ratings at A+, and short-term foreign and local currency ratings at A-1. However, S&P said the ratings could be raised if political institutions are strengthened and greater transparency in public finances is fostered. 'Although we expect to upgrade Qatar's sovereign rating in one-two years, we will be looking very closely at two key developments,' said Marchand. 'First, we need to assess whether the conditions for economic growth can be sustained by sufficient foreign direct investment (FDI) in all areas of infrastructure. Second is the development of economic and political institutions. We are waiting for more progress in this area.'