S&P Global Ratings assigned the UAE a long-term credit rating of “AA,” and “A-1+” on its short-term foreign and local currency sovereign credit ratings with a stable outlook, with the agency pointing to the country’s “strong fiscal and external positions,” S&P said in a note on its website.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

This is the first time that S&P has issued a consolidated sovereign credit rating for the UAE as a whole, as opposed to issuing separate ratings for individual emirates, according to Arab News.

The rationale behind the rating: The strength of the UAE government’s net asset position provides a buffer against the effects of fluctuations in oil prices amid rising geopolitical tension in the region, and will help it maintain its economic growth prospects, government revenues, and positive external account. Meanwhile, policy measures such as expenditure restraint and diversification efforts have helped the government secure revenues from streams other than hydrocarbons, the agency wrote.

S&P expects the UAE’s GDP growth to hover around 4% over 2025-2028, which it attributes to “buoyant non-oil sector activity and increasing oil production,” the ratings agency said. The agency sees crude oil production reaching about 3.5 mn barrels per day in 2028, up from just under 3 mn in 2024 — which, coupled with increased LNG production capacity, will help boost growth over the next few years. Meanwhile, non-oil growth will be aided by “public investment and government efforts to diversify the economy, combined with increasing trade and foreign investment,” the agency wrote.

The UAE is also projected to see fiscal surpluses averaging 3.2% of GDP until 2028 — but the surplus will halve relative to what was seen between 2021-2024, according to S&P. Lower oil prices and higher government spending is expected to lower the surplus to 2% of GDP this year, and that it will average 3.8% over 2026-2028, bringing it below the 6.4% average for 2021-2024. Sharjah — unlike Dubai, Abu Dhabi, and Ras Al Khaimah — is expected to see a fiscal deficit of 5% of its GDP over the next four years.

Israel-Iran escalations come with downside risks for the UAE, with the conflict potentially causing disruption to “key transportation routes, fluctuating energy prices, reduced tourism, capital outflows, higher security spending, and weaker consumer and investment confidence,” according to S&P. An unexpected decline in the UAE's per capita wealth or interest burdens rising for the consolidated government because of higher borrowing also present potential downside risks that could lower the UAE’s credit rating.

On the upside, the agency could raise the UAE’s ratings if it sees “significant improvements in the availability and timeliness of UAE-wide and emirate-specific data disclosures, particularly on fiscal assets, contingent liabilities, and external accounts. Measures to improve the effectiveness of monetary policy, such as establishing deep domestic capital markets, could also be positive for the ratings,” S&P wrote.

IN OTHER MACRO NEWS-

Emirates NBD sees the UAE’s GDP growth coming in at 4.8% this year, up 0.8 percentage points from last year, before slowing slightly to 4.6% in 2026, the bank said in its forecast update (pdf) for the month. The accelerated growth will be driven by increased activity in the hydrocarbon sector following recent OPEC+ production hikes, the bank said.

Oil growth is expected to increase to 5% — up from just under 1% last year. Meanwhile, non-oil growth is expected to slow slightly to 4.7% this year, down from 5% in 2024. The sectors driving growth are expected to include transport & storage, construction, and financial services.

Emirates NBD expects the UAE to see a current account surplus equivalent to 8.1% of GDP, down from 9.1% last year, on the back of lower oil prices. The bank expects oil to come in at an average of USD 68 per barrel in 2025, down from USD 80 in 2024.

However, the current account balance is expected to accelerate to 9% of GDP in 2026 “as both oil production and global oil prices are likely to be higher.” Lower oil prices are also expected to bring down the UAE’s fiscal surplus to 1.8% of GDP, down from 3.4% in 2024.

As for inflation, Emirates NBD sees an average monthly CPI inflation rate of 2.5% y-o-y in Dubai, in what would mark the lowest inflation figure from the emirate since 2021.

Tags: