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Ras Al Khaimah ratings upgrade signifies global confidence in emirate’s economy

S&P projects the emirates real GDP growth to average 4% between 2024 and 2027

Published: Thu 5 Dec 2024, 8:08 PM

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S&P highlighted Ras Al Khaimah’s “solid pipeline of tourism-related development projects” as a key growth driver. — File photo

S&P highlighted Ras Al Khaimah’s “solid pipeline of tourism-related development projects” as a key growth driver. — File photo

Ras Al Khaimah’s recent efforts in boosting its economic landscape has received a shot in the arm, as international ratings agencies S&P Global and Fitch have upgraded their ratings on the emirate.

S&P Global has upgraded Ras Al Khaimah’s credit rating from ‘A-/A-2’ to ‘A/A-1’, reflecting the emirate’s strong economic growth and fiscal stability. The agency highlighted Ras Al Khaimah’s “solid pipeline of tourism-related development projects” as a key growth driver. Additionally, the emirate’s mining sector, economic free zones, real estate, and ports are poised to benefit from non-oil growth and increased infrastructure spending across the UAE, GCC, and Indian subcontinent.

RAK’s integration within the UAE further supports the upgrade. S&P projects the emirates real GDP growth to average 4 per cent between 2024 and 2027, supported by tourism and infrastructure investments. The government’s conservative fiscal management enhances confidence in the emirate’s economic stability. Moreover, RAK’s economy is more diversified than many of its GCC counterparts, with manufacturing, wholesale and retail trade, and construction together accounting for 55 per cent of GDP.

This S&P upgrade follows Fitch Ratings’ upgrade of RAK to A, underscoring the emirate’s sustained economic resilience and robust fiscal position. These dual endorsements highlight Ras Al Khaimah’s increasing appeal to global investors and its strengthening position within the regional economy.

“Ras Al Khaimah’s upgraded credit ratings, combined with strong growth in tourism, infrastructure, and real estate, position the emirate as an increasingly attractive destination for global investment. The ongoing economic diversification and government support underscore RAK’s positive outlook,” Vijay Valecha, Chief Investment Officer, Century Financial, said in a note.

As part of its strategy to diversify its economy, Ras Al Khaimah has made substantial investments in its tourism industry . The Ras Al Khaimah Tourism Development Authority (RAKTDA) reported a record 1.22 million overnight arrivals in 2023, an 8 per cent increase from 2022. This surge was fueled by a 24 per cent rise in international visitors. The emirate’s hotel occupancy rates also increased significantly, reaching 74 per cent, a 12 per cent rise year-on-year.

Ras Al Khaimah aims to triple its visitor numbers to 3.5 million by 2030. Major projects like the Wynn Al Marjan Island integrated resort, scheduled to open in 2027, are pivotal. This $3.9 billion project represents 40 per cent of the emirate’s GDP and received the UAE’s first commercial gaming operator’s license. Alongside this, 20 new hotels are planned within the next three years, expanding room capacity by 75 per cent. According to Fitch, economic growth is projected at 6.2 per cent for 2024 and 5 per cent for 2025, driven by continued expansion in tourism.

Analysts expect Ras Al Khaimah’s revenue to rise from 21.5 per cent of GDP in 2023 to 22.9 per cent in 2024, up from 20 per cent in 2022. The introduction of corporate tax in the UAE is also projected to enhance the emirate’s revenue streams. This financial boost will support ongoing and future projects, further solidifying the emirate’s economic stability.

Just a 45-minute drive away, Ras Al Khaimah is emerging as a compelling alternative, offering attractive property prices and a rapidly growing infrastructure. “The emirate offers attractive returns on investment, with net yields on apartments in Ras Al Khaimah well surpassing the UAE average of 5.16 per cent. Developers such as RAK Properties are well-positioned to take advantage of this shift in demand,” Valecha said.

With a sharp focus on creating mixed-use developments, luxury homes, and premium hospitality projects, the company is meeting buyers’ needs who want both quality and affordability. And the numbers back this up - RAK Properties achieved revenue of Dh891 million in the first 9 months of 2024, reflecting a 30 per cent increase compared to the same period in 2023. Net profit surged 21 per cent to Dh133.4 million from Dh105.2 million in the corresponding period last year.

Interestingly, the government of Ras Al Khaimah has also increased its stake in the company from 5 per cent to 34 per cent, a clear vote of confidence in its growth potential and alignment with the emirate’s long-term vision. Projects like Mina “Al Arab, Bay Residences, and Gateway II Residences are making waves, attracting local and foreign investors,” Valecha said.

As of Q3 2024, RAK Properties’ market cap has surged to Dh3.33 billion, tripling from Dh1.1 billion in early 2023 — a clear sign that investors are taking notice. Additionally, the company offers a 2.60 per cent dividend yield. The stock jumped 15 per cent in the last 1 year and 76 per cent over the past two years, reflecting the market’s growing confidence in the company’s future and the broader momentum in Ras Al Khaimah’s real estate market. Nonetheless, the stock is trading 20 per cent below its all-time high, offering investors a decent entry opportunity. “With a strong lineup of projects like the waterfront Bayviews and Quattro Del Mar and solid government support, RAK Properties is well-positioned to ride the wave of rising demand,” Valecha said.



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