Abu Dhabi sovereign wealth fund assets to fall by 5% by end-2016 – Fitch

Ratings agency says UAE capital likely to draw down ADIA assets while issuing bonds to plug budget deficit
Abu Dhabi sovereign wealth fund assets to fall by 5% by end-2016 – Fitch
Abu Dhabi Investment Authority
By Ed Attwood
Wed 03 Feb 2016 09:06 AM

The Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, is expected to see its assets decline by just over 5 percent this year as the UAE capital attempts to balance its books on the back of the oil price slide.

Ratings agency Fitch said it projected a fall from an estimated $502 billion by end-2014 to $475 billion as outflows outpace investment returns.

Abu Dhabi’s budget deficit widened from 7.2 percent in 2014 to 13.2 percent last year, prompted by a drop in oil and gas income.

Fitch said it expected the deficit to decline to 11.6 percent of GDP this year, and to 5.3 percent in 2017.

“We expect the government to finance its 2016 and 2017 deficits through a combination of transfers from ADIA, the dividend from ADNOC, issuance of bonds and some further draw-down of general government deposits,” the agency wrote.

“However, we expect ADIA assets to rise again in 2017, when the ADNOC dividend should be sufficient to cover the budget deficit.

“Government deposits in UAE banks fell 16 percent to AED158 billion in 2015, but remain substantial at around 11 percent of GDP. The overall level of liquidity in the banking sector is still high.”

Fitch said it projected issuance of AED40 billion of bonds in the local market this year, and a further AED60 billion in 2017.

The agency has based its forecasts on an average price for Brent crude of $45 in 2016, and $55 next year.

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