S&P Global Ratings has affirmed its ‘BBB-/A-3’ long- and short-term foreign and local currency sovereign credit ratings on the Emirate of Sharjah, a member of the United Arab Emirates (UAE). The outlook is stable.
The agency stated that its transfer and convertibility assessment on Sharjah remained ‘AA+’.
Fiscal consolidation and debt dynamics
The stable outlook reflects S&P’s view that Sharjah’s government will introduce sufficient measures to begin stabilizing its net general government debt as a percentage of GDP over the next two years.Â
Moreover, the agency expects Sharjah’s fiscal deficits to gradually narrow over 2024-2027, due to the government’s revenue-enhancing measures, the UAE-wide implementation of corporate tax, and favorable economic growth prospects in Sharjah. However, S&P expects higher expenditure, including debt-service costs, compared with the government’s Medium-Term Financial Outlook (MTFO), resulting in a fiscal deficit of 3.9 percent of GDP by 2027, rather than the MTFO’s target of 3.4 percent. In 2023, gross government debt stood at about 52 percent of GDP against the MTFO target of 49 percent, mainly due to non-deficit items, including capital support to Bank of Sharjah and prefunding activities.
Economic outlook and sectoral performance
Following real GDP growth of 4.6 percent in 2023, S&P projects Sharjah’s economy to expand by 2.8 percent on average annually over the period to 2027, supported by activity in the manufacturing, construction, transport, and trade sectors. Sharjah’s economy is relatively diverse and not directly reliant on hydrocarbon exports. Sharjah’s GDP per capita is expected to strengthen to about $22,000 in 2024 from $19,000 in 2020.
Moreover, the report said the ratings on Sharjah reflect advantages from the emirate’s membership in the UAE, including contained external financing risks and the potential for financial support from the UAE in a hypothetical stress scenario.
Read more: Sharjah real estate transactions reach $462.83 million in April 2024
Robust sectoral performance
Sharjah’s economy showed 4.6 percent growth in 2023, supported by the government’s capital expenditure and strong performance in the largest economic sectors: wholesale and retail trade (25 percent of nominal GDP), manufacturing (16 percent), construction and real estate (about 10 percent each), and transport/storage (5 percent), along with the hospitality sector. During 2024-2027, these sectors are expected to continue expanding amid strong economic activity in the UAE and broader Gulf Cooperation Council, supported by favorable oil prices.
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