{"id":93334,"date":"2024-06-28T00:00:00","date_gmt":"2024-06-28T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/uaes-fcy-issuer-default-rating-affirmed-at-aa\/"},"modified":"2024-06-28T00:00:00","modified_gmt":"2024-06-28T00:00:00","slug":"uaes-fcy-issuer-default-rating-affirmed-at-aa","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2024\/06\/28\/uaes-fcy-issuer-default-rating-affirmed-at-aa\/","title":{"rendered":"UAE\u2019s FCY issuer default rating affirmed at AA-"},"content":{"rendered":"

Fitch Ratings affirmed the UAE\u2019s federal government\u2019s long-term <\/strong>foreign<\/strong>-currency issuer default<\/strong> rating <\/strong>at AA- with a stable outlook<\/strong>, it said in a statement<\/a>. The rating affirmation \u201creflects the UAE's moderate consolidated public debt level, strong net external asset position, and high GDP per capita.\u201d<\/p>\n

The country\u2019s net external asset position is supported by Abu Dhabi\u2019s sovereign net <\/strong>foreign assets<\/strong> \u2014 which comprised 122% of UAE GDP in 2023, the rating agency said, adding that the emirate holds among the highest of Fitch-rated sovereigns. Fitch affirmed Abu Dhabi's long-term foreign-currency issuer default rating at AA with a stable outlook <\/span>earlier this week<\/a>.<\/span><\/p>\n

The fiscal forecast:<\/strong> Fitch expects to see the UAE maintain a fiscal surplus this year, although the surplus is expected to narrow from an estimated 7.8% in 2023. The UAE is expected to have a fiscal surplus of 4.1% of GDP in 2024, 3.3% in 2025, and 2.6% in 2026, with surpluses in Abu Dhabi and Dubai, and budget deficits in Ras Al Khaimah and Sharjah, Fitch says.<\/p>\n

The UAE fiscal breakeven oil price is expected to average USD 64 per barrel in 2024-26<\/strong>, subject to potential adjustments based on Abu Dhabi's dividend plans. \u201cNarrower deficits in Sharjah and higher production levels in Abu Dhabi will mitigate the gradual drop in oil prices,\u201d Fitch said.<\/p>\n

The federal government\u2019s \u201cbudget is small, with revenues and expenditure at about 4% of <\/strong>GDP,\u201d <\/strong>the rating agency said.<\/p>\n

What\u2019s constraining the rating: <\/strong>The UAE\u2019s high reliance on hydrocarbons, \u201csignificant leverage of government-related entities,\u201d and \u201cweak governance indicators relative to rating peers\u201d are the primary factors holding it back from a rating upgrade. Geopolitical tensions between Iran, Israel, and the US also pose high-security risks to Abu Dhabi's hydrocarbon infrastructure and Dubai\u2019s status as a trade, tourism, and financial hub.<\/p>\n

The UAE faces the risk of a downgrade if Abu Dhabi\u2019s sovereign credit profile<\/strong> deteriorates<\/strong>, or public finances weaken, for example, \u201cdue to a sustained period of low oil prices or a materialization of contingent liabilities.\u201d Fitch said. A geopolitical shock negatively affecting economic, social, or political stability could also trigger a lower rating.<\/p>\n

OTHER KEY INDICATORS-<\/strong><\/p>\n