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Investing.com -- Fitch Ratings affirmed the United Arab Emirates’ Long-Term Foreign-Currency Issuer Default Rating at ’AA-’ with a Stable Outlook on Tuesday.
The rating reflects the UAE’s moderate consolidated government debt, strong net external asset position, and high GDP per capita. These strengths are supported by Abu Dhabi’s sovereign net foreign assets, which stood at 157% of UAE GDP in 2024, among the highest of Fitch-rated sovereigns.
These positive factors are balanced against weak governance indicators compared to rating peers, high dependence on hydrocarbon income, and significant leverage of government-related entities.
The UAE’s consolidated budget maintained a surplus in 2024 at 7.1% of GDP, following an 8.6% surplus in 2023. Abu Dhabi and Dubai posted surpluses while Ras Al Khaimah and Sharjah recorded deficits.
Fitch projects the UAE’s fiscal breakeven oil price at $45-50 per barrel in 2025 and 2026, excluding investment income. The rating agency forecasts consolidated surpluses of 5.3% of GDP in 2025 and 5.9% in 2026, despite an expected drop in oil prices from $79.5 per barrel in 2024 to $65 per barrel in 2025 and 2026.
The federal government’s budget remains small, with revenues and expenditure under 4% of GDP. It will receive a share of corporate income tax proceeds from 2026, which will be offset by lower grants from Abu Dhabi.
Consolidated UAE government debt was estimated at 24.9% of GDP at the end of 2024, well below the ’AA’ category median of 48%. This figure is projected to rise slightly to 25.4% in 2025 and 2026.
The federal government’s debt was 3.5% of GDP in 2024, with external debt at $10 billion. The government aims to increase its total outstanding debt to about AED45 billion over the years to build a domestic-currency yield curve rather than fund deficits or projects.
Fitch estimates overall contingent liabilities from government-related entities at about 62% of UAE 2023 GDP.
GDP is projected to rise by 5.2% in 2025, supported by a 9% increase in oil production in Abu Dhabi. Non-oil growth is expected to exceed 4% in 2025, driven by construction, government and government-related entity investment, and population growth.
The rating agency highlighted high geopolitical risks in the region as a concern, though it assumes the current military conflict will remain contained and not persist for more than a few weeks.
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