Fitch Ratings affirmed both the UAE and Abu Dhabi's long-term foreign-currency issuer default ratings, maintaining Abu Dhabi’s at AA with a stable outlook, and the UAE’s at AA- with a stable outlook, it said in statements here and here. This came on the back of what it cited as a strong net external asset position and high GDP per capita, as well as Abu Dhabi’s sovereign asset position, which is among the highest of Fitch-rated sovereigns.

This is despite the geopolitical risks posed by the conflict between Israel and Iran, which it said could cause “short-term disruptions” to trade and hydrocarbon infrastructure that it expects the UAE to absorb due to large fiscal and external buffers.

Also supporting Abu Dhabi’s rating is the emirate’s low government debt — which is among the lowest of Fitch-rated sovereigns. However, Abu Dhabi’s rating is constrained by a combination of “a high dependence on hydrocarbons, a relatively weak but improving economic policy framework and low governance indicators compared with peers,” the agency wrote.

Local currency debt to increase: The ratings agency expects Abu Dhabi’s debt to rise to 18.2% of GDP, up from 17.4% in 2024, as the government issues more local-currency debt to support the domestic market, alongside more issuances from government-related entities.

Growth to remain strong: Fitch sees the UAE’s headline growth coming in at 5.2% this year, supported by a 9% increase in oil production as Opec+ hikes the UAE’s production quota. Non-oil growth is pegged at 4% this year. For Abu Dhabi, GDP is expected to grow at 6.3% in 2025 and 4% for 2026. The agency also sees non-oil growth remaining strong across the coming years, after it recorded 6.2% growth in 2024, driven by major projects and population growth.

How this compares: The growth forecast is optimistic compared to other ratings agencies and banks, with Emirates NBD forecasting 4.8% growth this year, the IMF and S&P Global both expecting a more modest 4% growth, and the World Bank forecasting 4.6% growth. The CBUAE expects a stronger 4.7% GDP growth.

The fiscal forecast: The agency expects Abu Dhabi to pencil in a budget surplus of 7% of GDP in 2025, down from 9.9% in 2024 — a prediction that it bases on its Brent crude oil price forecast of USD 65 per barrel and forecast for oil production of 3.2 mn bbl/d. The surplus is expected to widen to 8% in 2025 on the back of “higher oil production, modest spending growth and the start of corporate income tax receipts.”

There are factors that could lead to a downgrade for Abu Dhabi: “Substantial erosion of fiscal and external positions, for example, due to a sustained decline in oil prices, or a materialisation of contingent liabilities,” coupled with “a geopolitical shock that negatively affects economic, social or political stability” are all factors that could lead to a negative rating action for both the UAE and Abu Dhabi.

There’s also room for improvement: Strengthening governance, reducing oil dependence, and lowered geopolitical risk coupled with a maintenance of strong fiscal and external balance sheets could lead to positive rating actions for the emirate.

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