S&P affirms Ras Al Khaimah’s A/A-1 rating, trims 2026 growth forecast on Middle East war spillovers

S&P Global Ratings affirmed its A/A-1 long- and short-term foreign- and local-currency sovereign credit ratings for Ras Al Khaimah (RAK), with a stable outlook, the agency said. S&P also kept RAK’s AA+ transfer and convertibility assessment unchanged.

The rationale behind the rating: S&P expects RAK’s government to stick to prudent fiscal and economic policies and protect its large net asset position, even as growth and revenue risks stay elevated. It also expects its fiscal buffers to help it maneuver through adverse geopolitical shocks or a weaker growth environment.

The base case: The UAE’s fiscal, economic, external, and policy flexibility is expected to cushion the whole federation — RAK included — against the fallout of regional conflict, and the federal government is expected to step in with extraordinary financial support for RAK if ever needed.

Growth gets trimmed for 2026: S&P now sees RAK’s real GDP growth slowing to 1.8% this year, down from its earlier 2% forecast, after an estimated 5.7% expansion in 2025. Growth is expected to average 2.4% across 2026-2027 before rebounding to an average of 3.8% in 2028-2029, supported by tourism and infrastructure projects including Wynn Al Marjan Island, set to open late next year after pushing back its opening date due to supply chain disruptions.

The war is the swing factor: RAK’s trade- and hospitality-heavy economy is exposed to spillovers from the Middle East war — from disrupted trade routes to weaker tourism, transport, real estate, and manufacturing activity. S&P’s base case assumes continued shipping volatility tied to bottlenecks in the Strait of Hormuz and the risk of localized clashes, and it flagged the risk of re-escalation as very high.

By the sector

The offsets: Inter-Gulf demand has propped up manufacturing, mining, and construction, while a pickup in domestic tourism has partly made up for fewer international visitors. S&P said it can’t rule out a longer-term hit to tourist arrivals, exports, and real estate demand if security risks persist, adding that a lasting recovery hinges on the war being resolved.

Tourism numbers are still climbing, just more slowly: RAK drew about 1.4 mn visitors in 2025, up 5.7% y-o-y. In the first half of 2026, arrivals reached 670k, up 3% y-o-y, with UAE domestic visitors making up roughly 72% of the total as international arrivals were held back by limited flight routes.

Real estate has cooled: Developers have pared back new residential launches to support valuations as investors turn more cautious, and S&P doesn’t expect projects to resume in earnest until early 2027, with the possibility of more lasting damage to demand.

But mining is a bright spot: The sector — anchored by government-owned Stevin Rock, one of the world’s largest limestone quarrying operations — accounted for about 15% of exports and 30% of GDP before the war. First-half 2026 performance was solid on higher prices and steady volumes, with local sales rising to 63% of total sales (from 60% a year earlier) as exports redirected toward Kuwait and Qatar following disruption to trade with India and Bangladesh.

On the fiscal side, S&P is forecasting a smaller surplus of about 1% of GDP this year, down from 6.1% in 2025, before surpluses climb to an average of 3.8% of GDP over 2027-2029 as corporate tax, gaming tax, and hospitality-linked revenue come online from 2027, and Marjan starts paying dividends from 2028. Total government expenditure is projected to average about 13% of GDP over 2026-2027, up from 9.6% in 2025, largely on higher capital spending tied to tourism infrastructure.