The ratings are supported by the emirate's strong fiscal position and low debt level
Moody’s Investors Service has maintained its outlook Ras Al Khaimah as stable, with the emirates’ economic growth expected to pick up gradually in the coming years and is fiscal position to remain strong in the years leading to 2021.
According to Moody’s, the ratings are supported by RAK’s “strong fiscal position, low debt level, and the advantages that RAK derives from its membership of the UAE, including low external risks.”
The ratings, however, are constrained by what Moody’s called “the nascent stage” of RAK’s political institutions compared to non-regional peers in the same rating category, as well as by limited monetary flexibility and underdeveloped local currency domestic bond market.
While Moody’s estimated that RAK’s economic growth slowed to 1.5 percent in 2017, it believes that economic growth will accelerate to average about 2.5 percent between 2018 and 2021.
Additionally, Moody’s expects a budget surplus of about 1.5 percent of GDP in 2018, up from 1 percent of GDP in 2017, a much weaker outturn than the 4 percent of GDP recorded in 2016. Between 2018 and 2021, Moody’s expects fiscal surplus to average approximately 2 percent.
The Moody’s outlook also noted that the implementation of value-added tax (VAT) will have a positive economic benefit for the emirate, with government revenues expected to increase to about 19 percent of GDP in 2018 from 17 percent the previous year.
The report also noted that gross debt has been declining in absolute terms since 2013, and stands at an estimated 20 percent of GDP for 2018. By 2021, consolidated gross debt is expected to decline to about 17 percent of GDP.