S&P affirms Abu Dhabi's creditworthiness

The Abu Dhabi government's large net asset position continues to provide a considerable buffer to mitigate the impact of commodity market volatility on the economy.

Credit ratings agency Standard & Poor's (S&P) predicts a stable outlook for Abu Dhabi and Ras Al Khaimah (RAK) economies and also affirms their long-term and short-term ratings.

The Abu Dhabi government's large net asset position continues to provide a considerable buffer to mitigate the impact of commodity market volatility on the economy, the ratings agency said in a statement.

"S&P affirmed its 'AA' long-term and 'A-1+' short-term foreign and local currency sovereign credit ratings on Abu Dhabi. The outlook is stable," according to the statement.

It added: "The stable outlook on Abu Dhabi reflects our view of balanced risks to the ratings over the next two years. We believe that Abu Dhabi's economy will remain resilient and its fiscal position will remain extremely strong, but we also anticipate continued structural and institutional weaknesses."

The agency said it could consider raising the ratings on Abu Dhabi if it observed pronounced improvements in data transparency, including on fiscal assets and external data, alongside further progress in institutional reforms.
Regarding RAK, the agency said: "It affirmed its 'A/A-1' long- and short-term foreign and local currency sovereign credit ratings on RAK with a stable outlook."

It added: "The stable outlook reflects our expectation that RAK's fiscal account will be largely insulated from weaker demand from the GCC region. We expect continued support for RAK through the UAE's system of fiscal federalism, and consider that there is a strong likelihood that RAK would receive extraordinary support from the UAE in the event of financial distress."

The agency said it could raise the ratings if the transparency and effectiveness of RAK's institutions materially improves, including but not limited to, the closure of material gaps in macroeconomic data, and if improvements in the institutional framework were to increase the predictability and transparency of policy decisions.

Sharjah
S&P revised Sharjah's outlook to negative on economic and fiscal risks. S&P believes the updated population data provided by Sharjah following the 2015 population census increases transparency and should support policy making.

In a statement, S&P said: "The agency revised its outlook on its long-term foreign and local currency sovereign credit ratings on Sharjah to negative from stable and affirmed its 'A/A-1' long- and short-term foreign and local currency sovereign credit ratings.

"The negative outlook reflects downside risk that economic growth and the government's fiscal position may weaken beyond our current projections. It also reflects the possibility that we could lower the rating by more than one notch should multiple factors materialise concurrently," S&P said.

It added: "We could revise the outlook to stable and affirm the ratings if growth accelerates and fiscal plans show a consistent trend of consolidation over the next two years."

- abdulbasit@khaleejtimes.com

• Abu Dhabi