S&P: Abu Dhabi economic growth set for ‘steady’ rise
There is a stable outlook for Abu Dhabi’s economy, with growth set to “steadily recover” to hit 3 percent in 2021, according to an S&P Global Ratings report.
The ratings agency affirmed its “AA/A-1+” sovereign credit rating for the emirate, saying that the government’s net asset position will “shield it against almost all possible external shocks.”
“The stable outlook on Abu Dhabi reflects our expectation that economic growth will steadily recover and that the country’s fiscal position will remain strong over the next two years, although structural and institutional weaknesses will likely persist,” S&P said.
“We could consider raising our ratings on Abu Dhabi if we observed pronounced improvements in data transparency, including on fiscal assets and external data, alongside further progress in institutional reforms. Furthermore, measures to improve the effectiveness of monetary policy in Abu Dhabi, such as developing domestic capital mar- kets, could also be positive for the ratings over time.”
The ratings agency said it expects Abu Dhabi’s economic growth to average at 2.3 percent between this year and 2021, after a 0.5 percent contraction last year due to an agreement to cut oil output.
“The economy contracted in real terms in 2017, mainly owing to OPEC’s oil production cuts. We forecast gradually rising real GDP growth, on the back of recovering oil prices and production, and a revival in investment,” S&P said.
“We project that growth will rise gradually to 3 percent by 2021, on the back of increased oil production, higher investment, and recovering domestic credit growth bolstered by higher oil prices and improving demand in the region.”
“We expect regional geopolitical developments will have a limited impact on Abu Dhabi, and expect continued domestic stability.”
S&P also said that the UAE emirate of Sharjah has a “stable” outlook, with GDP growth seen averaging at 2 percent between 2018 and 2021. It affirmed its “BBB+/A-2” rating on Sharjah.
“The ratings are supported by Sharjah’s relatively strong fiscal position, despite a low revenue base, and the advantages that Sharjah derives as a part of the UAE, including low external financing risks and the potential for extraordinary financial support from the UAE,” it said.
S&P revised its outlook for the neighboring emirate of Ras AlKhaimah from “negative” to stable.
“We expect revenue sources from state-owned enterprises that are becoming akin to general government departments will help Ras Al-Khaimah post larger fiscal surpluses and lower government debt-servicing ratios than previously assessed,” it said.