Fitch Ratings Gives the United Arab Emirates an AA- Rating and Outlook Stable
Posted on 11/12/2020
Ratings agency Fitch Ratings gave the United Arab Emirates (UAE) a Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘AA-‘ with a Stable Outlook. The ‘AA-‘ rating applies to the federal government of the UAE. This is the highest sovereign rating in the Gulf region and the first solicited public rating for the UAE sovereign. The UAE is home to a number of sovereign wealth funds (example: Abu Dhabi Investment Authority) and state-owned enterprises.
Fitch Ratings sees that the UAE has moderate consolidated public debt level, strong net external asset position, and high GDP per capita.
In the press release, Fitch Ratings states, “The COVID-19 pandemic and the oil price shock it triggered means Fitch forecasts a consolidated budget deficit of 3.8% of GDP in 2020 from a surplus of 3.8% in 2019. Financing needs (fiscal balance excluding estimated Abu Dhabi Investment Authority (ADIA) investment income) will reach 6.3% of GDP in 2020, before progressively narrowing to 2.2% by 2022, from a surplus of 1.3% in 2019. Our fiscal numbers include in revenue estimated investment income of ADIA, which has estimated foreign assets of USD579 billion (164% of GDP) at end-2019, but treat the estimated cash transfers from ADIA (which the government includes in dividend revenue) as financing items.”
Saudi Arabia
Days before, Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) was lowered by Fitch Ratings to Negative from Stable and affirmed the IDR at ‘A’. The reason for the decreasing in outlook was due to Saudi Arabia’s continued weakening of its fiscal and external balance sheets, which has been accelerated by the coronavirus pandemic and lower oil prices.
