Fitch Ratings affirmed Abu Dhabi's long-term foreign-currency issuer default rating at AA with a stable outlook, it said in a statement. The rating affirmation “reflects Abu Dhabi's high GDP per capita and strong fiscal and external metrics,” the ratings agency said.

The fiscal forecast: Fitch expects to see the emirate maintaining a fiscal surplus this year and next, although the surplus is expected to narrow from an estimated 11% in 2023. Abu Dhabi is expected to have a fiscal surplus of 5.4% of GDP in 2024 and 3.6% in 2025, Fitch says. The surplus figure without accounting for investment income from the Abu Dhabi Investment Authority comes in at 1.8% of GDP in 2024 and “close to balance” next year.

What’s constraining the rating: Abu Dhabi’s high reliance on hydrocarbons and a “relatively weak but improving economic policy framework and low governance indicators compared with peers” as the primary factors holding it back from a rating upgrade. Hydrocarbon revenue accounted for an estimated 76% of annual fiscal revenue, on average, from 2019 through to 2023, Fitch says. “Au Dhabi's ability to diversify revenue sources remains constrained by the GCC's low tax environment and policy aimed at keeping conditions attractive for FDI and supporting economic diversification.”

What would have a positive impact on the rating: Structural economic factors, including reducing its reliance on oil and hydrocarbon revenue, would support a higher rating for Abu Dhabi, Fitch said. “A strengthening in governance and a reduction in geopolitical risk while maintaining strong fiscal and external balance sheets” could also support a rating upgrade.

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