AA- Ratings Affirmed For The UAE, Outlook Stable

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CI Ratings said that the ratings are supported by sound public finances, the stable domestic political situation and a high GDP per capita.

CI Ratings (CI) has affirmed its AA- long-term foreign currency rating (LT FCR) and long-term local currency rating (LT LCR) of the UAE, with a stable outlook.

The UAE boasts of strong external accounts, the current account surplus posted a 6.6 per cent of GDP in 2018 as well as 6.8 per cent in 2017 and is projected to remain in surplus—averaging 5.1 per cent of GDP in 2019-21.

The rating agency stated that the ratings reflect the continued strength of the country’s external position which is characterised by the availability of substantial financial assets.

CI said that it expects that the oil rich emirate of Abu Dhabi would be willing to support federal institutions in the unlikely event of financial distress.

The UAE’s posted $99.5 billion in official foreign exchange reserves in December 2018 as well as $95.4 billion in December 2017, providing sufficient coverage of short-term external debt on a remaining maturity basis.

Additionally, Abu Dhabi Investment Authority (ADIA) is projected to have around $ 825 billion assets under management (AUM), three times the size of the country’s total external debt as estimated by the International Monetary Fund) and was equivalent to around 194 per cent of GDP in 2018.

The emirates’ real output growth is expected to expand by an average of 3.1 per cent in 2019-21, supported by government infrastructure spending ahead of Dubai’s 2020 World Expo, however, the outlook remains subject to ongoing risks arising from geopolitical uncertainties.

According to CI, the UAE’s sovereign ratings are constrained by the relative dependence on hydrocarbons and budget rigidities, oil and gas accounts for around 40 per cent of consolidated government revenue and for almost one third of GDP.

The ratings are also constrained by geopolitical uncertainties arising from the escalating US-Iran tensions.