Fitch affirms UAE's ‘AA-' rating on strong external buffers, fiscal prudence
RIYADH: The UAE's long-term foreign-currency rating has been affirmed at 'AA-' with a stable outlook by Fitch, reflecting the country's consolidated government debt, strong net external asset position, and high gross domestic product per capita.
The US-based rating agency noted that this outlook benefits from Abu Dhabi's sovereign net foreign assets — amounting to 157 percent of the UAE's gross domestic product in 2024 — which rank among the highest of all Fitch-rated sovereigns.
The agency noted the ongoing regional geopolitical risks, but it assumes the conflict involving Israel, the US, and Iran will be contained and short-lived.
The report comes as Israel and Iran agreed to a ceasefire brokered by the US, which took effect on June 24, following 12 days of conflict that raised fears of a broader regional escalation.
In its commentary, Fitch Ratings stated: 'A regional conflagration would pose a risk to Abu Dhabi's hydrocarbon infrastructure and to Dubai as a trade, tourism and financial hub,'
It emphasized that 'the UAE's ratings could absorb some short-term disruptions given large fiscal and external buffers.'
Fitch's assessment follows S&P Global's recent assignment of 'AA/A‑1+' with a stable outlook for its foreign and local currency sovereign credit ratings to the UAE, citing the country's strong fiscal and external positions.
The agency also noted that the UAE's sizable asset cushion would help shield it from oil price volatility and regional geopolitical tensions.
Fitch estimated the UAE's consolidated fiscal surplus stood at 7.1 percent of GDP in 2024, following a level of 8.6 percent in 2023, with surpluses in Abu Dhabi and Dubai and budget deficits in Ras Al Khaimah and Sharjah.
It projected a fiscal breakeven oil price of $45–$50 per barrel in 2025 and 2026, excluding investment income, which Fitch attributed partly to 'rising oil production volumes and the significant share of spending by GREs (government-related entities).'
'We forecast the consolidated surplus at 5.3 percent of GDP in 2025 and 5.9 percent in 2026. Narrower deficits in Sharjah and higher oil production levels in Abu Dhabi will mitigate the forecast drop in oil prices from $79.5 per barrel in 2024 to $65/bbl in 2025 and 2026,' Fitch said.
It added: 'Dubai will retain a budget surplus.'
With regard to the federal government's budget, Fitch stated that it remains below 4 percent of GDP and is primarily focused on core services.
The report emphasized that the federal budget must remain balanced by law, leaving limited scope for borrowing or adjustment. From 2026 onward, corporate tax revenue is expected to help offset reduced grants from Abu Dhabi.
Despite moderate direct debt, Fitch views the UAE's economy as highly leveraged. 'We estimate overall contingent liabilities from GREs of the emirates and the FG in 2023 at about 62 percent of UAE 2023 GDP,' the report said, though it acknowledged that many state-owned entities are financially sound.
Fitch forecasts UAE GDP to grow by 5.2 percent in 2025, supported by a 9 percent increase in oil production from Abu Dhabi and strong non-oil growth of over 4 percent, driven by investment and population expansion. However, it warned of risks from 'lower oil prices and global growth uncertainties.'
Earlier this month, the UAE Central Bank's Quarterly Economic Review for December 2024 reported that the country's GDP reached 1.77 trillion dirhams ($481.4 billion) in 2024, growing 4 percent. Non-oil sectors contributed 75.5 percent of the total — highlighting continued economic diversification.
The central bank maintained its real GDP growth forecast at 4 percent for 2024, with an anticipated acceleration to 4.5 percent in 2025 and 5.5 percent in 2026.
On governance, Fitch said the UAE maintains an ESG Relevance Score of '5[+]' for political stability, rule of law, and institutional quality.
The agency credited the UAE's 'record of domestic political stability, strong institutional capacity, effective rule of law and a low level of corruption,' referencing World Bank Governance Indicators, where the country ranks in the 70th percentile.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Argaam
an hour ago
- Argaam
Leadership of insurance pool for latent defects insurance product transferred to Tawuniya
The Insurance Authority (IA) announced that leadership of the insurance pool for the latent defects insurance product has been transferred from Malath Cooperative Insurance Co. to The Company for Cooperative Insurance (Tawuniya), effective for three years as of June 24. As many as 17 insurance firms are taking part in this pool. According to Argaam 's data, Tawuniya announced last February its selection by the IA to lead the insurance pool against the inherent defects insurance product on behalf of the insurance sector. In July 2020, Malath signed an agreement with several participating insurance players for the latent defects insurance product, following the Saudi Central Bank's (SAMA) approval.
Arab News
2 hours ago
- Arab News
Pakistani exporters bank on Middle East to export 125,000 tons of mangoes this season
ISLAMABAD: A leading Pakistani fruits exporters association said on Wednesday it has set an ambitious target of exporting 125,000 tons of mangoes from May to September this year to earn $100 million in revenue, hoping to export 70 percent of these to markets in the Middle East. Pakistan is the world's fourth-largest mango producer, with the fruit's exports generating millions of dollars in revenue annually, according to the Pakistan Fruit and Vegetables Export Association (PFVEA). Pakistan's 20 varieties of mangoes come second only to oranges as the most-produced fruit in the country. The country produces around 1,800,000 metric tons of mangoes annually, with 70 percent grown in Punjab, 29 percent in Sindh and 1 percent grown in Khyber Pakhtunkhwa. 'Pakistan is aiming to export 125,000 tons of mangoes this season, 25 percent more than last year's target of 100,000 tons, with exports having started on May 25 and continuing until the end of September,' PFVEA Patron-in-Chief Waheed Ahmed told Arab News. 'We are hoping to export 70 percent of this target to Middle Eastern countries, our largest market, and if achieved, the country is expected to earn an estimated $100 million in foreign exchange,' he added. However, Ahmed warned adverse effects of climate change may impact the amount of mangoes Pakistan produces this year. Pakistan, which has faced irregular weather patterns ranging from heat waves and unusually heavy rains, is frequently ranked among the most adversely affected countries due to climate change effects. Mango production has been on the decline in Pakistan for the past three consecutive years. 'Mango production in Pakistan is consistently declining due to climate change and water scarcity and there is a risk of up to 25 percent reduction in total mango production this year as well,' Ahmed warned. After the projected decline, the PFVEA official said this season's total mango production may come down to around 1.4 million tons 'However, we have increased the export target because we are exporting only 125,000 tons out of the estimated 1.4 million tons, so we remain hopeful of achieving it despite all challenges,' Ahmed said. Ahmed called for interventions such as improved water management, production of climate-resilient mango varieties, research and development and modernization of agriculture and horticulture. He said efforts were underway to boost mango exports to non-traditional markets such as Japan, the United States, South Korea and Australia, with a special focus on expanding exports to Turkiye and China. He noted that regional tensions, particularly Pakistan's conflict with India and the Israel-Iran tensions, have led to higher export costs due to additional charges by shipping companies on Pakistani cargo. 'We urge the Federal Ministry of Commerce and the Ministry of Maritime Affairs to intervene and eliminate these extra charges to help improve export competitiveness,' Ahmed said. Farmers and exporters agreed adverse climate conditions had affected not only the volume of production but also the quality of mangoes. 'We have been facing losses due to multiple factors, including low yield and lower-than-expected demand caused by conflicts in the Middle East,' Asif Ahmed, an exporter from Iftikhar Ahmed & Co, told Arab News. Asif, who has been exporting mangoes for over six decades, hoped the Iran-Israel ceasefire would improve the situation and that fruit prices would rise to help cover the losses. 'We have farms in Sindh's Tando Allahyar and Mirpur Khas districts where production was almost around 30 percent less than normal this year,' Asif said. Amjad Hussain, an exporter from Punjab's Multan city, agreed climate change had reduced the size of the mangoes and their quality as well. 'It has affected more than 25 percent of our yield, which will reduce our exports, though the exact figure will be clear by September,' Hussain said.
Arab News
2 hours ago
- Arab News
Pakistan, UAE agree to strengthen cooperation during Bilateral Political Consultations
ISLAMABAD: Pakistan and the United Arab Emirates (UAE) on Wednesday agreed to strengthen cooperation in multiple sectors as the two sides took part in the second round of Bilateral Political Consultations (BPC) in Abu Dhabi, Pakistan's foreign ministry said. Pakistan and the UAE held their inaugural BPC session in 2020. The BPC is another forum for strengthening cooperation between the two countries that enjoy cordial ties rooted in shared faith, culture, economic, trade and investment ties. In the second round of the consultations, Pakistan's delegation was led by Shehryar Akbar Khan, the additional foreign secretary (Middle East), while the UAE was led by Reem Ketait, the deputy assistant minister for political affairs. 'During the consultations, both sides reviewed the entire spectrum of bilateral relations and reaffirmed their resolve to further strengthen cooperation across multiple sectors,' Pakistan's foreign ministry said. 'The two sides discussed regional and global developments of mutual interest and reiterated their commitment to enhanced coordination and dialogue at multilateral forums.' Khan stressed further deepening fraternal ties between Pakistan and the UAE while both sides appreciated the positive trajectory of bilateral ties. Pakistan and the UAE also expressed satisfaction at the progress made under existing institutional mechanisms, including the Joint Ministerial Commission (JMC) and regular leadership-level exchanges, the statement said. 'The Bilateral Political Consultations concluded with both sides agreeing to maintain the momentum of high-level exchanges and institutional engagements, and to convene the next round of consultations in Islamabad on mutually agreed dates,' the foreign ministry said. The UAE is Pakistan's third-largest trading partner after China and the United States. More than 1.5 million Pakistanis live and work in the UAE, sending back over $5 billion in remittances annually. Bilateral trade reached approximately $10.9 billion in fiscal year 2023–24, including $2.08 billion in exports and $6.33 billion in imports, according to official Pakistani data. Last year, the UAE pledged $10 billion in future investments in promising sectors of Pakistan's economy.
