S&P affirms ‘AA/A-1+’ for Abu Dhabi; outlook stable

Standard & Poor’s (S&P) affirmed Abu Dhabi’s ‘AA/A-1+’ sovereign credit ratings, with a stable outlook, the ratings agency said on Sunday.

“We continue to expect that the Abu Dhabi government's large net asset position will provide a considerable buffer to mitigate the impact of commodity market volatility on the economy,” S&P said.

In comparison to its Gulf neighbors, the decline in oil prices has not impacted Abu Dhabi’s economy, which maintained one of the highest GDP per capita levels in the world. Thanks to Abu Dhabi’s strong net asset position, the economic climate is “resilient to shocks in the commodity market,” the agency said.

S&P estimates Abu Dhabi’s GDP per capita at about $71,600 in 2017. The report also projected real economic growth to recover to about 2.5 percent on average in the coming years. While this is well below other markets in the same GDP-per-capita category, the current wealth levels in the economy could substantially reduce potential risks.

This wealth is expected to further increase once Abu Dhabi’s crude oil output reaches three million barrels per day over 2017-2020. The report, however, expects the emirate’s non-oil activities to decline due to “tightening fiscal monetary conditions and increased geopolitical uncertainties in the region.”

Overall, S&P experts estimate Abu Dhabi’s government debt at about 30 percent of GDP in 2017.

“We could consider raising the ratings on Abu Dhabi if we observed pronounced improvements in data transparency, including on fiscal assets and external data, alongside further progress in institutional reforms,” S&P added. “What's more, measures to improve the effectiveness of monetary policy, such as developing domestic capital markets, could be positive for the ratings over time.”