By Karen Leigh
Agency cites stability provided to the northern emirate by its role in the UAE
Ras Al Khaimah has received an A-A1 rating from Standard & Poor's on the strength of the stability provided to the small northern emirate by its UAE membership.
“Ras Al Khaimah benefits from its membership of the United Arab Emirates, which supports its economic and political stability. We expect the government to record a surplus of 5.5% of GDP in 2010, supporting the government's net creditor position,” the agency said in a report.
The stability reflects a balance between the geopolitical and economic risks present in the GCC.
The ratings are further underpinned by the relatively strong wealth of the emirate’s citizens, with GDP per capita expected at $20,580 in 2010 – slightly above the median for other 'A' rated sovereigns.
S & P said the transfer and convertibility assessment on RAK is 'AA+'.
"The affirmation reflects RAK's membership of the UAE, which in our view provides an anchor and potential support for political and economic stability," Standard & Poor's credit analyst, Kai Stukenbrock, said in a statement. "It also reflects sustained government surpluses, which are strengthening RAK's slight net creditor position."
He said he believed that the UAE would provide external support in situations of political, economic, or financial stress.
“The federal government, funded mostly by Abu Dhabi and to a lesser extent by Dubai, meets most of the current expenditure costs of the seven emirates that make up the UAE. Individual emirates, including RAK, have limited fiscal obligations – primarily related to local infrastructure and services and capital spending to develop emirate-level projects – and substantial fiscal flexibility,” he said.
The financial capacity of the UAE and the larger emirates, especially Abu Dhabi, would be handily able to cover RAK’s liabilities. Its total debt was estimated at about 30% of GDP at the end of 2009.
"The stable outlook reflects our view that the risks posed by geopolitical issues and RAK's exposure to the economic fortunes of the larger emirates and the broader region are,” he said, “balanced by our expectation of the near certainty of continued ongoing support from the UAE.”