Fitch affirms UAE at AA-, outlook stable

Agency expects UAE's consolidated budget surplus to remain at 4.6 percent of GDP
Fitch affirms UAE at AA-, outlook stable

Fitch has reaffirmed the United Arab Emirates’ (UAE) long-term sovereign credit rating at ‘AA-‘ with a ‘stable’ outlook. The rating reflects the country’s modest public debt, strong net external assets, and high per capita Gross Domestic Product (GDP), according to a report released on Thursday night.

Fitch expects the UAE’s consolidated budget surplus to remain at 4.6 percent of GDP, compared to 11.1 percent in 2022. Abu Dhabi is predicted to have a surplus at an average Brent price of $80 per barrel, while Dubai and Ras Al Khaimah will have a balanced budget, and Sharjah will experience a deficit.

Furthermore, Fitch anticipates that the average oil price in the UAE will be $62 per barrel from 2023-2025. The consolidated surplus is also expected to increase to 3.7 percent of GDP in 2024 and 3.4 percent in 2025.

Fitch predicts that the decline in oil prices to $75 per barrel in 2024 and $70 per barrel in 2025 will be offset by the lower Sharjah deficit and the increased production levels in Abu Dhabi.

The rating agency expects Abu Dhabi to continue to drive cyclical fiscal policies, albeit with less intensity than before the pandemic. State-owned companies, such as Abu Dhabi Development Holding Company (ADQ), will play a more significant role in driving the country’s fiscal policies.

While Fitch anticipates that the UAE’s GDP growth will slow down to 2.1 percent in 2023 and 3.6 percent in 2024, the non-oil economy is expected to grow by 3.4 percent in 2023, after contracting by 1.4 percent. This contraction is equivalent to the voluntary cut that the UAE participates in as part of the OPEC+ alliance.

The rating agency also expects the growth of the non-oil economy to slow down to 2.7 percent in 2024. Nonetheless, it remains relatively strong despite global headwinds, supported by government spending and a robust real estate sector. Fitch predicts that the oil economy will expand in 2024 due to the increase in the oil production ceiling under the OPEC+ agreement.

Read more: Islamic banking continues to grow in the UAE

Government debt 

Fitch predicts that the UAE’s consolidated government debt will reach 31.4 percent of GDP in 2023. In terms of individual debt profiles, Dubai accounts for approximately 78 percent of its GDP in 2022.

Debt issuances

The federal government continues to issue debt bonds in international markets to address debt issues. Although the debt law allows the government to issue more, the federal government has already issued $7 billion in debt bonds, which is the maximum set by the Council of Ministers. All returns have been deposited with the Emirates Investment Authority (EIA) for the purpose of long-term investment. Fitch states that “debt law may allow the partial use of foreign exchange issuance returns to invest, but we expect that the authorities will not use this option in the case of new issuances.”

Fitch also notes that the federal government has begun issuing debt bonds in local currency in 2022 and plans to increase them until the amount owed reaches approximately AED 45 billion to build a local currency yield curve instead of financing deficits or projects. All yields are invested in high-rating intergovernmental bonds, mostly in the United States (U.S.), with matching maturities. In addition, government-related entities are likely to be the first to issue bonds in local currency in the UAE. Fitch also mentioned that the authorities have shifted from the issuance of treasury bonds to instruments during 2023.


Fitch notes that despite the moderate government debt-to-GDP ratio, the UAE has a highly leveraged economy. Government-linked entities’ total accidental commitments are estimated at approximately 64 percent of the UAE’s GDP for 2021. Furthermore, total non-bank external private debt is expected to exceed 50 percent of GDP. However, Fitch emphasizes that a significant portion of government companies’ debt is owed by well-positioned companies, which represent a low level of risk.

In 2022, the banking sector’s debt stood at 38 percent of GDP. Despite the sector’s large size, with assets accounting for approximately 183 percent of GDP in 2022, risks are limited by the sector’s increased net interest margin and strong liquidity.

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