Abu Dhabi holds AA rating from Fitch as oil exports cushion blow, spending ramps up

Fitch Ratings has affirmed Abu Dhabi’s AA sovereign rating with a stable outlook, pointing to strong fiscal and external buffers even as the emirate heads into a period of higher spending and borrowing amid regional tensions, according to a press release.

More spending, more borrowing: Fitch expects government spending to rise as Abu Dhabi steps up support for key government-related entities (GREs) — particularly in logistics — in light of the war, with broader programs likely to follow to support the non-oil economy. That will feed into higher debt, which is projected to rise to 25.3% of GDP this year from 19.5% in 2025, though it remains well below peer medians.

Strong buffers are still keeping the emirate comfortable: Abu Dhabi’s balance sheet continues to anchor the rating, with sovereign net foreign assets estimated at around 291% of GDP — among the highest globally — alongside what Fitch describes as “very strong fiscal and external metrics.”

It’s all about oil: The rating affirmation also reflects “the resilience of oil export revenue during the Iran war,” helping offset near-term disruption. The UAE managed to get some of its oil out despite the blockade due to the Habshan-Fujairah pipeline. The pipeline has a capacity for about half of its production, or 1.8 mn bbl / d.

REMEMBER- The UAE is gearing up for even more oil revenues as it looks to boost its capacity and export freely without Opec’s restrictions. A production hike to 5 mn bbl / d — up from about 3.4 mn bbl / d before the war — could add some USD 40 bn in annual gross oil revenue, analysts estimate. The country is also expected to ramp up spending across upstream capacity, drilling, and export infrastructure.

On the downside: Fiscal space is tightening. Fitch expects the budget surplus to narrow to 3.0% of GDP in 2026 from 6.5% last year, with a small deficit emerging when excluding investment income — the first since 2020.

AND- Risks are stacking up: The agency flags “significant risks of a renewed flare-up,” including potential disruption to oil and gas exports or a prolonged closure of the Strait of Hormuz. These are scenarios that could weigh on growth, fiscal balances, and the broader credit profile.

The bigger concern? The non-oil economy. A “more lasting and structural deterioration in the regional security environment would challenge economic diversification” and hit confidence-sensitive sectors, even as GRE-led investment continues to anchor activity. The emirate’s high reliance on the oil sector is what is holding it back from a higher rating at the moment.

The UAE government is already acting to support the economy through a renewed localization and supply chain resilience push. The government launched a AED 1 bn industrial fund to support vital industries like pharma, food, and industrials, while a federal tourism package is also in the works as authorities look to cushion a sector under pressure.

Growth is taking a hit: Fitch expects Abu Dhabi’s economy to contract by around 1% in 2026, with both oil and non-oil activity under pressure before a gradual recovery.

Still, resilience holds for now: Higher oil prices and alternative export routes are helping keep revenues broadly in line with pre-war expectations, supporting the stable outlook despite the uncertain backdrop.