Ras Al Khaimah, Sharjah real GDP to grow faster in 2018

S&P expects Sharjah's economy will expand at about 2 per cent over 2018-2021, with a slight acceleration in 2020.

Real GDP growth of Ras Al Khaimah and Sharjah will increase in 2018 as compared to last year on the back of increased capital expenditures in Dubai and Abu Dhabi, a new report said.

Global ratings agency S&P estimates real GDP growth of 2.5 per cent for Ras Al Khaimah in 2018 as compared to 1.5 per cent last year, supported by a recovery in regional demand and increased capital expenditure in Dubai and Abu Dhabi.

"We forecast that RAK's economic expansion will average 2.5 per cent over 2018-2021. We expect the increase in oil prices compared with 2017 will support regional demand. Increased business activities and capital spending ahead of Expo 2020 in Dubai should also support medium-term growth. We estimate RAK's GDP per capita at $28,500 in 2018 and expect it will average at about $29,300 over the forecast period," S&P analysts said in a note released on Saturday.

Unemployment rate in the emirate has been remaining steady at 3.8 per cent over the years.

Commenting on Sharjah, S&P expects the emirate's economy will expand at about 2 per cent over 2018-2021, with a slight acceleration in 2020, supported by the manufacturing, construction and tourism sectors. It sees real GDP growth inching higher from 2 per cent last year to 2.1 per cent this year.

"We expect the fiscal position to strengthen over the next two years, supported by various revenue-raising measures, increased transfer payments from government-related entities [GREs] and Sharjah's share of receipts from the UAE-wide value-added tax," S&P analysts said.

RAK outlook revised
S&P has revised Ras Al Khaimah's outlook for long- and short-term foreign and local currency sovereign credit ratings from stable to negative due to fiscal position weakening.

However, it affirmed the emirate's "A/A-" rating and also maintained Sharjah's "BBB+A/-2" rating with stable outlook.

S&P said negative outlook for RAK reflects the risk that the government's fiscal position may weaken beyond its current projections. And if a downgrade occurred, it could lower the rating by more than one notch.

"We could lower the ratings if our fiscal or debt assessments were to come under pressure. This could happen, for example, if the government were to post significant or persistent fiscal deficits, or if interest payments were to remain above 5 per cent of revenues on average over the forecast period of 2018-2021. This could occur due to government measures yielding lower revenues or higher-than-expected debt servicing costs," S&P said in a note released on Saturday.

The ratings agency noted that it could revise the outlook to stable if RAK maintained fiscal surpluses and debt service costs.
S&P sees only a small increase in revenue from expected VAT transfers from the UAE federal government.

- waheedabbas@khaleejtimes.com