Standard & Poor’s has affirmed its ‘AA’ long-term and ‘A-1+’ short-term sovereign credit ratings on Abu Dhabi, the ratings services agency said in a statement on Monday.
The agency maintained its outlook on the UAE capital as stable and kept its transfer and convertibility assessment unchanged at ‘AA+’.
“The ratings on Abu Dhabi are supported by the government’s very strong asset position, which provides significant financial flexibility, and that has allowed the emirate – through strong countercyclical policies and preemptive support to the financial sector -to face the global economic downturn with a high degree of resilience,” Standard & Poor’s credit analyst Luc Marchand said in the statement.
Abu Dhabi is the largest of UAE’s seven emirates, constituting over 85 percent of the nation’s total land area. It holds 10 percent of the world’s oil, five percent of its gas reserves, and produces 90 percent of oil in the UAE.
According to S&P’s, its ratings “are also underpinned by the country’s domestic political stability and wealth, reinforced by its rich resource endowment, and policies that reinforce Abu Dhabi’s integration with the global economy.”
“The stable outlook on Abu Dhabi balances the Emirate’s strong financial position and prudent policies against geopolitical risks, high contingent liabilities, and potential impediments to growth stemming from undeveloped institutions,” Marchand said.
Furthermore, significant improvements in transparency and availability of financial and economic data, and progress on institutional reforms such as institutions necessary to improve the functioning of a market economy, could have a favourable impact on the ratings in the coming years, as would a lasting reduction of geopolitical risk, S&P’s said.
The ratings agency added that the “ratings are constrained by the geopolitical risks that face all sovereigns in the region, the lack of transparency, and limited availability of financial and economic data, particularly regarding the government’s assets, as well as the contingent liabilities arising from the banking system and the public sector of the UAE as a whole”.
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