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RIYADH: S&P Global has assigned the UAE a long-term credit rating of “AA” with a stable outlook as it expects strong fiscal and external positions to be maintained over the next two years.

In its latest report, the global credit rating agency said that the grade also reflects the Emirates’ net asset position, which could provide a buffer to counteract the effects of oil price swings and geopolitical tensions in the Gulf region. 

According to the agency, “AA” indicates a country’s strong capacity to meet its financial commitments. 

The strong rating of the UAE aligns with the broader trend observed in the Middle East region, and in March, S&P Global raised ��������’s rating to “A+” from “A” with a stable outlook underpinned by the Kingdom’s ongoing social and economic transformation. 

In its latest report, the US-based agency said: “The stable outlook reflects our expectation that the UAE’s consolidated fiscal and external positions will remain strong over the next two years, amid continued prudent policymaking and resilient economic growth.”

Non-oil sector to drive growth

S&P Global added that the UAE’s economic growth is expected to remain resilient at 4 percent over 2025-2028, driven by strong non-oil sector performance and a rise in activities. 

“Despite lower oil prices and headwinds from a global economic slowdown, we expect that continued fiscal surpluses at the consolidated federal government and individual emirates level, along with investment income on liquid assets, will support an increase in the net asset position to an estimated 177 percent of GDP (gross domestic product) through 2028,” the report said. 

S&P Global further said that the UAE government’s fiscal surpluses are expected to average around 3.2 percent of GDP through 2028, based on assumptions that Brent oil prices will stay around $60 per barrel in 2025 and $65 per barrel through 2028. 

Government debt will remain stable at about 28 percent of GDP over the next four years as the federal government and emirates, including Abu Dhabi, plan to issue local currency debt to develop domestic capital markets. 

According to the report, the country will have limited monetary flexibility given that the dirham is pegged to the US dollar. 

“This means the UAE’s monetary policy is closely aligned with that of the US Federal Reserve, regardless of domestic economic conditions. We also consider that the domestic local currency bond market remains underdeveloped compared with similarly rated peers,” added S&P Global. 

The report comes just days after an economic update prepared by the Institute of Chartered Accountants in England and Wales, in association with Oxford Economics, said that the economy of the UAE is projected to expand by 5.1 percent in 2025, driven by a recovery in oil output and a 4.7 percent rise in non-oil GDP, with tourism expected to emerge as a key element propelling this growth. 

Earlier this month, the Central Bank of the UAE revealed that the Emirates’ GDP reached 1.77 billion dirhams ($481.4 million) in 2024, recording 4 percent growth, with non-oil sectors contributing 75.5 percent of the total. 

CBUAE added that the Emirates is expected to witness economic growth of 4.5 percent in 2025 before accelerating further to 5.5 percent in 2026.

The latest S&P Global analysis further said that the UAE’s oil production is projected to rise to about 3.5 million barrels per day by 2028, up from slightly less than 3 million in 2024, while the Ghasha gas and Ruwais liquefied natural gas are expected to significantly enhance Abu Dhabi’s production capacity.

The non-oil growth in the Emirates will be underpinned by public investment and government efforts to diversify the economy, combined with increasing trade and foreign investment. 

“Projects such as the Saadiyat cultural district and Disney Park in Abu Dhabi, and the Wynn integrated resort in Ras Al Khaimah seek to boost tourism revenue,” added the analysis. 

Affirming the growth of tourism in the country, a report released in April showed that Dubai recorded a 3 percent annual increase in international visitor numbers to 5.31 million in the first quarter of this year. 

According to the data released by the Dubai Department of Tourism and Commerce Marketing, the city also attracted 18.7 million international tourists in 2024, representing a 9 percent rise compared to the previous year. 

S&P Global added that the UAE would be modestly affected by the proposed 50 percent US tariff on steel and aluminum if no agreement is reached, as these metals accounted for 4.3 percent of the Emirates’ non-oil outbound shipments in 2023. 

In 2023, the UAE exported approximately $1.4 billion worth of steel and aluminum products to the US, representing about 0.3 percent of its GDP.

The study further noted that the UAE has also introduced structural measures to enhance the business environment, which include a foreign direct investment law that permits foreign investors to fully own businesses in various sectors, as well as rules to liberalize personal and family law.

Another initiative is the Golden Visa Program, aimed at supporting talent retention by granting long-term residency to investors, entrepreneurs, and skilled professionals.

“We anticipate that these measures will increase labor market flexibility, investment, and foreign worker inflows. This will be balanced by the nationalization of the workforce, or ‘Emiratization’ policies,” added S&P Global.

Future outlook

The analysis further stated that the UAE’s credit rating could be upgraded in the future if Emirates implements significant measures to improve the effectiveness of monetary policy, such as establishing a deep domestic capital market. 

However, the rating could be downgraded if the UAE’s per capita wealth, currently at $47,000, starts declining due to lower economic growth or higher population inflows. 

“Downside pressure could also arise if the consolidated government interest burden were to increase materially because of higher borrowing, alongside elevated external financing needs,” added the report.

LONDON: Oil prices eased in Asian trade on Wednesday, after a gain of 4 percent in the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a US Federal Reserve rates decision that could impact oil demand.

Brent crude futures slipped 35 cents, or 0.5 percent, to $76.10 a barrel by 9:23 a.m. Saudi time. US West Texas Intermediate crude futures fell 23 cents, or 0.3 percent, to $74.61 per barrel.

Both had initially been up 0.3 percent to 0.5 percent in early trade.

US President Donald Trump called for Iran’s “unconditional surrender” on Tuesday.

Israel is running low on defensive “Arrow” missile interceptors, however, raising concerns about its ability to counter long-range ballistic missiles from Iran, the Wall Street Journal reported on Wednesday, citing an unidentified US official.

Analysts said the market was largely worried about supply disruptions in the Strait of Hormuz, a conduit for a fifth of the world’s seaborne oil.

Iran is OPEC’s third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil, but spare capacity among producers in the Organization of the Petroleum Exporting Countries and its allies can readily cover this.

“Material disruption to Iran’s production or export infrastructure would add more upward pressure to prices,” Fitch analysts said in a client note.

“However, even in the unlikely event that all Iranian exports are lost, they could be replaced by spare capacity from OPEC+ producers ... around 5.7 million barrels a day.”

Meanwhile, some analysts stayed positive from a technical analysis standpoint.

There is a bullish stance on WTI in the near term due to rising geopolitical risk in the Middle East, said OANDA senior market analyst Kelvin Wong. This is in addition to a relatively low level of net long positioning in WTI futures among large speculators, he said.

Markets are also looking ahead to a second day of US Federal Reserve discussions on Wednesday, in which the central bank is expected to leave its benchmark overnight interest rate in the range of 4.25 percent to 4.50 percent.

However, the conflict in the Middle East and the risk of slowing global growth could potentially push the Fed to cut rates by 25 basis points in July, sooner than the market’s current expectation of September, said Tony Sycamore, market analyst with IG.

“The situation in the Middle East could become a catalyst for the Fed to sound more dovish, as it did following the Oct. 7, 2023, Hamas attack,” Sycamore said.

Lower interest rates generally boost economic growth and demand for oil.

Confounding the decision for the Fed, however, is the Middle East conflict’s potential creation of a new source of inflation via surging oil prices.

Further, recent data showed the US economy was slowing as Trump’s erratic policymaking style fed uncertainty.