Abu Dhabi's economy will remain resilient over the next two years, with sufficient fiscal reserves to substantially cushion any potential fiscal or geo-political risks, according to S&P.
In its latest report, the global ratings agency affirmed its “AA/A-1+” sovereign credit ratings and a stable outlook, citing strong fiscal and external positions.
“The exceptional strength of the government's net asset position provides a buffer to counteract the negative impact of lower oil prices on economic growth, government revenues, the external account, and increased geopolitical uncertainty in the region,” Nourredine Lafhel, primary credit analyst, S&P, wrote in the report.
The analyst estimated Abu Dhabi will maintain its extremely strong net fiscal asset position above 200 percent of gross domestic product (GDP) between 2017-2020, which is one of the highest net government asset ratios among the sovereigns S&P rates.
Despite the low oil prices, the UAE capital maintains one of the highest GDP per capita levels in the world. It has very strong net government asset position, mostly in foreign currency, which makes its economy resilient to shocks in the commodity market.
“We estimate Abu Dhabi's GDP per capita at about $71,600 in 2017. The average change in real GDP per capita will likely show a contraction of about 2.5 percent on average in 2017-2020, largely due to high levels of immigration,” Lafhel said.
“We estimate that the population increased by 70 percent between 2008 and 2016 to 2.8 million, and will reach about 3.5 million by 2020.”
Abu Dhabi's real economic growth will recover to about 2.5 percent on average in the coming years, supported by a gradual increase in oil prices and planned public investments.
According to the report, the government has announced its plan to increase oil production capacity and to heavily invest in the expansion of downstream activities.
S&P estimated Abu Dhabi's output of crude oil to average three million bpd over 2017-2020 despite a temporary decline this year.
The oil field maintenance scheduled for this year will cut output to meet the UAE's commitment to Organization of the Petroleum Exporting Countries' agreements, which have been extended to March 2018.
The report, however, said non-oil activities in the emirate will face headwinds from tightening fiscal and monetary conditions and increased geopolitical uncertainties in the region.
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