Fitch Ratings affirmed today the UAE’s long-term foreign-currency issuer default rating at AA- with a stable outlook. Earlier this week the ratings agency also affirmed Abu Dhabi’s rating at AA with a stable outlook.
The AA- rating reflects the UAE’s moderate consolidated government debt, strong net external asset position and high GDP per capita. The nation benefits from Abu Dhabi’s sovereign net foreign assets, which are among the highest of Fitch-rated sovereigns.
These strengths, however, are balanced by weak governance indicators relative to rating peers, the UAE’s high dependence on hydrocarbon income and the significant leverage of government-related entities. The AA- rating also applies to the federal government.
Budget surplus, moderate debt support outlook
Fitch Ratings affirmed the UAE’s strong position and outlook due to several factors, including the country’s budget surplus. “We estimate the consolidated budget remained in surplus in 2024 at 7.1 percent of GDP after 8.6 percent in 2023, with surpluses in Abu Dhabi and Dubai and budget deficits in Ras Al Khaimah (A+/Stable) and Sharjah (not rated),” the report said.
The UAE’s outlook remains stable amid moderate consolidated government debt. Fitch estimates consolidated UAE government debt at 24.9 percent of GDP at end-2024, well below the ‘AA’ category median of 48 percent. It will rise slightly to 25.4 percent in 2025 and 2026.
“Individual emirates have varied debt profiles, with Sharjah standing out with a higher debt burden. We project Abu Dhabi’s debt to increase as it starts issuing in local currency, Sharjah to borrow to fund deficits, the FG to build the yield curve, while Dubai debt will continue to edge down. In the event of lower oil prices, we expect Abu Dhabi would initially choose to increase borrowing over large drawdowns from Abu Dhabi Investment Authority, although the emirate has internal caps on borrowing,” the agency added.
Fitch Ratings also views the UAE as having high leverage in its economy, despite a moderate government debt/GDP ratio. It estimates overall contingent liabilities from GREs of the emirates and the FG in 2023 at about 62 percent of the UAE’s 2023 GDP. Based on publicly available data, a large share of state-owned enterprise debt is at healthy entities with little risk, but many do not disclose financial data.
Geopolitical tensions could risk Abu Dhabi’s oil structure
Fitch Ratings added that regional geopolitical risks are high and the current escalation cycle is highly uncertain. It assumes the regional conflict will remain contained and will not persist for more than a few weeks. A regional conflagration would pose a risk to Abu Dhabi’s hydrocarbon infrastructure and to Dubai as a trade, tourism and financial hub.
“Gulf maritime trade is a vital interest of the UAE. We estimate the UAE’s ratings could absorb some short-term disruptions given large fiscal and external buffers,” the report added.
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GDP to rise by 5.2 percent in 2025
Fitch Ratings projects the UAE’s GDP to rise by 5.2 percent in 2025, buoyed by a 9 percent rise in oil production in Abu Dhabi, close to OPEC+ production quotas. Abu Dhabi’s ADNOC stated it has a production capacity of 4.85 million barrels per day, well above Fitch’s 2025 forecast of 3.18 bpd.
It also projects robust non-oil growth of over 4 percent in 2025, despite mounting global challenges, reflecting construction, government and GRE investment, and slowing but persistent population growth. Nonetheless, risks are rising given the regional impact of lower oil prices and global growth uncertainties.
