Arab News | Fitch affirms UAE at ‘AA-’ with stable outlook

RIYADH: Fitch Ratings affirmed the UAE’s long-term issuer default ratings at ‘AA-’ with a stable outlook, citing strong external assets, low government debt and resilience in oil export revenues despite the regional war. 

In its latest report, the rating agency said Abu Dhabi’s sovereign net foreign assets were estimated at 180 percent of UAE gross domestic product in 2026, among the highest levels of Fitch-rated sovereigns. The country’s strong credit profile is also underpinned by its high GDP per capita and substantial fiscal and external buffers. 

The affirmation comes amid heightened regional tensions that have disrupted shipping through the Strait of Hormuz and weighed on business confidence and investment across the Middle East. 

In July, Fitch affirmed Saudi Arabia’s ‘A+’ sovereign credit rating with a stable outlook, citing strong fiscal buffers and external finances despite regional conflict and temporary trade disruptions. 

“The Stable Outlook reflects demonstrated resilience of oil export revenues during the Iran war, which largely offsets the immediate negative impact of the war, as well as abundant fiscal and external buffers, and our expectation that individual emirates will bear the cost of the war rather than the federal government,” Fitch said. 

Fitch said the UAE’s strengths are balanced by relatively weak governance indicators compared with rating peers, elevated geopolitical risks, heavy reliance on hydrocarbon revenues and significant leverage among government-related entities. 

Growth outlook under pressure 

Fitch anticipates a gradual reopening of the Strait of Hormuz from the first quarter of 2027. Until then, it expects periodic strikes and counterstrikes, mainly targeting military sites and ships. These could disrupt Abu Dhabi’s oil flows, although the agency does not anticipate significant physical damage. 

The report added that a re-escalation of hostilities later in 2027 or beyond cannot be ruled out, while the longer-term impact of the war on non-oil growth and economic diversification remains uncertain. 

According to Fitch, the UAE’s real GDP is forecast to grow by 0.5 percent in 2026, driven by an approximately 7 percent increase in hydrocarbon GDP. 

The country’s non-oil GDP is expected to contract by 1.5 percent, while Dubai’s GDP is projected to shrink by close to 5 percent. 

“The longer and more structural the deterioration in the regional security environment, the greater the adverse impact would be, which could challenge the sovereign balance sheet,” added Fitch. 

Fiscal buffers limit pressure 

The UAE’s consolidated budget is expected to post a surplus of 4 percent of GDP in 2026, despite a nearly 20 percent increase in spending to cushion the immediate effects of the war and finance large support programs. 

Abu Dhabi and Dubai are forecast to remain in surplus, while Ras Al Khaimah and Sharjah are expected to record deficits. 

Consolidated government debt is projected to edge up to 22.8 percent of GDP in 2026, from 22.6 percent at the end of 2025. The ratio remains well below the 45 percent median for sovereigns in the ‘AA’ rating category. 

“We project Abu Dhabi and Dubai’s debt will be broadly stable, Sharjah will borrow to fund deficits,” added Fitch. 

UAE banks appear resilient under Fitch’s base-case scenario for the war, supported by sound metrics and ample liquidity and capital.  

Risks to the rating 

A prolonged deterioration in regional security that significantly disrupts oil and gas exports or shipping through the Strait of Hormuz could put pressure on the UAE’s rating, particularly if it leads to a substantial weakening of fiscal and external positions. 

Further improvements in the consolidated government balance sheet, greater fiscal flexibility at the federal level and stronger confidence in Abu Dhabi’s unconditional support for federal government debt could support an upgrade, Fitch said.