Fitch affirms UAE's AA- rating; expects conflict to be short-lived
Fitch Ratings has affirmed its AA- rating on the UAE, citing the country's robust financial buffers despite high regional political risks and hydrocarbon dependence.
The long-term foreign-currency issuer default rating (IDR) with a stable outlook mainly benefits from the UAE capital's substantial sovereign net foreign assets, which were estimated to be 157% of the country's gross domestic product (GDP) last year – one of the highest among Fitch-rated sovereigns.
'The AA- rating reflects the UAE's moderate consolidated government debt, strong net external asset position and high GDP per capita,' the ratings agency said on Tuesday.
Fitch noted that while regional political risks are high, the ongoing conflict involving Israel, the United States and Iran is expected to remain contained and short-lived.
If the conflict does become widespread, Abu Dhabi's oil infrastructure and Dubai's role as a trade, tourism and finance hub would be impacted.
In the event of lower oil prices, Abu Dhabi is expected to increase borrowing over large drawdowns from Abu Dhabi Investment Authority, Fitch said. It projected a low UAE fiscal breakeven oil price of $45 to $50 per barrel in 2025 and 2026, excluding investment income.
The consolidated surplus is projected to stand at 5.3% of GDP in 2025 and 5.9% in 2026. GDP could rise by 5.2% this year, supported by a 9% growth in Abu Dhabi's oil output and robust non-oil expansion exceeding 4%.
(Writing by Cleofe Maceda; editing by Seban Scaria)
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